The Association of American Railroads publishes an excellent monthly compendium of economic data called Rail Time Indicators. I’ve been meaning to mention it for months.
The latest edition reports another sign of economic recovery: March freight rail traffic recorded its first year-over-year gain in almost two years:
A second chart shows just how much freight activity declined in the fall of 2008 and how far it still has to go to recover (watch out for the truncated y-axis, though):
The report slices and dices these data in all sorts of interesting ways, e.g., by product (coal, chemicals, etc.). Highly recommended for macro data lovers.
P.S. Calculated Risk provides further excerpts on the report.
During the initial years of the housing downturn, optimists sometimes offered the following argument: “Everyone has to live somewhere. If a family loses their home to foreclosure, they will become renters. Their new residence might be smaller and less desirable than their former home, but from the perspective of housing units it’s a wash: their former home becomes vacant, but a previously empty rental becomes occupied. That should limit downward pressure on housing overall.”
That argument contains an element of truth: many foreclosed homeowners do indeed become renters (some even become homeowners again). But I’ve always wondered how many former homeowners follow a different path and instead move in with their parents, friends, or roommates, rather than getting their own place to live. Similarly, I’ve wondered how many young adults have delayed starting their own households and instead have stayed at home longer.
On Wednesday, the Mortgage Bankers Association released a study by Gary Painter (sponsored by the Research Institute for Housing America) that examines this question. His answer? America lost 1.2 million households from 2005 to 2008, despite ongoing population increases. Oh, and we likely lost even more households in 2009.
Needless to say, that retrenchment contributes to the ongoing overhang of vacant homes and rental properties.
As one piece of evidence about changes in household formation, Painter looked at the fraction of households that were overcrowded, which is defined as having more people than rooms. He found that overcrowding rates increased sharply from 2005 to 2008 (the most recent year for which he had data):
The Bureau of Economic Analysis has released its third look at the economy in the fourth quarter of 2009. The economy grew rapidly in the quarter, but slightly less than previously reported: the new estimate is a 5.6% pace of real GDP growth vs. 5.9% in the prior estimate.
As usual, I think the best way to understand this report is to see what sectors contributed the most or least to reported growth:
Almost two-thirds of the growth reflects businesses restocking their shelves and warehouses slowing the rate at which they were working down inventories; the change in inventory investment accounted for 3.8 percentage points of the overall 5.9% of growth. (Updated: 3/31/10)
Consumer spending grew at a modest 1.6% pace and thus added 1.2 percentage points to overall growth (consumer spending accounts for about 70% of the economy and 70% x 1.6% = 1.2%, allowing for some rounding). That’s down from the previous quarter, when cash-for-clunkers boosted car purchases. Housing investment also slowed, again in the wake of earlier efforts–the tax credit for new home buyers–that had boosted growth in the third quarter.
Business investment in equipment and software showed signs of life, growing at a healthy 19% pace. That added 1.1 percentage points to growth, more than half of which was offset by the ongoing decline in non-residential construction.
Government spending fell slightly during the quarter. Stimulus efforts boosted non-defense spending by the federal government, but that increase was more than offset by a decline in defense spending and in state and local spending.
This morning the Census Department released its latest look at housing activity. The headlines are that housing starts fell by 5.9% in February, mostly because of weakness in the Northeast and the South (which may well reflect February’s terrible weather). Most of the decline was in multi-family; single-family starts were essentially unchanged.
Although starts and permits usually grab the headlines, I think it’s also useful to look at another measure of housing activity: the number of houses under construction:
Not surprisingly, the chart shows that the number of single-family homes under construction fell off a cliff in early 2006. Almost 1 million new single family homes were under construction in February 2006. Today there are just 300,000.
The precipitous decline ended last summer, and housing construction has been essentially flat for several months. Perhaps housing construction has finally found bottom?
In its recent Going for Growth report, the OECD concludes that the economic and financial crisis will leave an unwelcome legacy: a permanent reduction in economic activity. This loss averages about 3% of potential GDP across the 20 member countries for which the OECD was able to make these estimates.
As the following chart shows, those losses differ greatly across countries:
Ireland and Spain are the clear losers, with the crisis cutting economic activity by more than 10%. Despite being a catalyst for much (but by no means all) of the crisis, the United States faces one of the smallest losses. The 2.4% reduction in potential U.S. GDP is a sobering hit, but is less than that faced by 16 of the other nations.
This week the Organization for Economic Cooperation and Development released its annual Going for Growth report. The purpose of G4G is to benchmark economic performance among the OECD member countries and suggest pro-growth policy reforms.
My favorite chart in the report examines how GDP per capita differs so much across countries:
The first column of bars shows how GDP per capita in each country stacks up relative to a benchmark equal to the average level of the 15 richest OECD countries in 2008. (Fun fact: In prior years, the OECD used the United States as the benchmark.) As you can see, the United States has the third highest level of per capita income, topped only by Luxembourg and Norway. Looking lower down, you can see that, on average, the GDP per capita of the EU19 countries is more than 20% lower than the benchmark and more than 30% lower than in the United States.
There are two basic ways that a country can achieve a high level of GDP per capita: People can work a lot (i.e., high labor hours per person) or people can work productively (i.e., high output per hour worked). The second and third columns of bars disaggregate the income differences into those two components.
The second column shows that there are significant differences among the countries in the average number of hours worked per person. As you might expect, people in the United States work slightly more than the benchmark average of the richest 15 OECD countries. People work substantially more, on average, in some nations, most notably South Korea, Iceland, and the Czech Republic. People work substantially less in Turkey, France, and Belgium. (Keep in mind that these figures are average hours per person, so they are influenced by the age distribution of the population as well as the number of hours worked by working-age people.)
The third column shows that there are even larger differences among the countries in productivity. Most notably, all of the countries with low per capita incomes have relatively low productivity.
OECD researchers repeated this analysis for a group of emerging economies:
The productivity comparisons are striking: China, Indonesia, and India are 90% less productive than the 15 richest OECD countries. That’s an enormous gap.
The economy grew briskly last quarter. According to the second estimate by the Bureau of Economic Analysis, gross domestic product increased at a 5.9% annual pace in the fourth quarter of 2009, a bit higher than BEA’s first 5.7% estimate.
As usual, I think the best way to understand this report is to see what sectors contributed the most or least to reported growth:
Almost two-thirds of the growth reflects businesses restocking their shelves and warehouses: inventories accounted for 3.8 percentage points of the overall 5.9% of growth.
Consumer spending grew at a modest 1.7% pace and thus added 1.2 percentage points to overall growth (consumer spending accounts for about 70% of the economy and 70% x 1.7% = 1.2%). That’s down from the previous quarter, when cash-for-clunkers boosted car purchases. Housing investment also slowed, again in the wake of earlier efforts–the tax credit for new home buyers–that had boosted growth in the third quarter.
Business investment in equipment and software showed signs of life, growing at a healthy 18% pace. That added 1.1 percentage points to growth, about half of which was offset by the ongoing decline in business investment in structures.
Government spending fell slightly during the quarter. Stimulus efforts boosted non-defense spending by the federal government, but that increase was more than offset by a decline in defense spending and in state and local spending.
As I discussed briefly yesterday, Treasury has announced plans to revitalize its Supplementary Financing Program (SFP), which will effectively mop up $200 billion in excess reserves over the next two months. Even though this is a Treasury action, it strikes me as an important step (with many yet to come) in the Fed’s exit strategy.
The boost in the SFP has created some confusion among observers, however, because of the limited information that Treasury and the Fed have provided about the rationale for the move. Indeed, as one reader pointed out to me, Ben Bernanke makes no mention of the SFP in his prepared testimony today. (Anyone know if he was asked about it in Q&A?)
Over at Econbrowser, Jim Hamilton provides an excellent summary of the SFP and the possible implications of its rebirth. He concluding thoughts:
Still, one is led to wonder whether there might be a connection between today’s announcement about the SFP and last week’s announcement of an increase in the Fed’s discount rate. Numerous Fed officials encouraged us to interpret the latter as a routine and technical management tool. Are the discount hike and SFP renewal separate and purely technical developments, or is something more involved?
If you are interested in these issues, I encourage you to read his entire post.
As Confucius Lao Tzu once said, a journey of a thousand miles begins with a single step. The Fed faces just such a journey today: returning monetary policy to normal as the economy heals. And in case you didn’t notice, the Fed has already taken three steps down the road.
Step 1 was the termination of various special credit facilities (e.g., the Term Auction Facility) that were created to provide liquidity during the crisis.
Step 2 was last week’s sort-of-surprise announcement that the Fed was increasing the discount rate from 0.5% to 0.75%.
Step 3 is today’s announcement that Treasury is reviving the Supplementary Financing Program (SFP). Over the next two months, Treasury will issue $200 billion in bills for the SFP and then place the proceeds in its account at the Fed. The SFP will thus mop up $200 billion of liquidity that Fed asset purchases have injected into the monetary system.
Treasury began the SFP in September 2008 when the Fed needed help sterilizing the monetary impact of the programs it created to provide liquidity to the financial sector. The program peaked at more than $500 billion in late 2008, and then began to decline as sterilization ceased to be a Fed concern and as the federal debt limit began to loom. With the recent increase of the debt limit, Treasury again has room for the SFP, hence today’s announcement.
Update: Thanks to Brooks for pointing to Lao Tzu as the source of the famous quote; many sites attribute it to Confucius, but those claiming Lao Tzu seem more credible. If you start Googling or Binging this topic, you can also explore such amusing issues as: How do you spell Lao Tzu? Didn’t he really say “a journey of a thousand miles begins beneath one’s feet”? And “wait a minute, the ancient Chinese didn’t use miles, did they?”
Last week, the Council of Economic Advisers released its 2010 Economic Report of the President (ERP). I haven’t had time to read it yet, but I did take a quick spin through looking at the charts and getting a feel for it.
The first thing I noticed is that the folks at the CEA have made an important innovation: the ERP now includes references to the academic studies, government reports, etc. on which it bases some of its conclusions. That’s a welcome break from a long-standing tradition (which I never really understood) that the ERP didn’t include references.
A second useful innovation is that the ERP is available in eBook formats, including for my beloved Kindle. Not to add to their already enormous workload, but I look forward to the 2011 or 2012 version having dynamic graphics and live links to the references.
Here are some of the charts that I particularly liked:
1. The boom and bust of house prices. By this measure, house prices are still historically high–except for the bubble.
2. The declining role of banks in the financial sector. Note the growth of mutual funds and ABS issuers.
3. How rising health care costs may consume a rising share of employee compensation. (Note, however, that by setting the axis at $30,000 rather $0, the chart visually exaggerates the effect.)
4. How the rate of being uninsured varies with age.
