John Irons's Blog


Economic News, Data and Analysis

Income and Poverty Census Report

Income and poverty data are out today. Not encouraging.
Full data
Quick take:
Overall: Median incomes declined by about $100 (but not statistically significant).
Median incomes for those 65 years or younger fell by about $600 (and was statistically significant).
Of most concern is that declines in the earnings for full-time, year-round workers. For men, median incomes fell by about $1,000, and for women over $300. (also, statistically significant).
Poverty rates increased from 12.5 percent to 12.7 percent. There were broad-based increases in poverty across the spectrum.
Shares of income in the midle 3 quintiles declined, while incomes in the highest quntile increased.
Number of those without health insurance increased by about 860,000.

Filed under: Data, Economics, Economy

Corporate Profits at Record Highs, While Labor Compensation at 38-year Lows

OMB Watch – Economy and Jobs Watch: Corporate Profits at Record Highs, While Labor Compensation at 38-year Lows

Recent data show a major shift in the balance between corporate
income and labor compensation. As a share of the economy labor
compensation has not been this low in almost 40 years (since 1966), and
after-tax corporate profits are at the highest levels ever recorded by the Bureau of Economic Analysis.

Since it’s peak in 2001, as a share of gross domestic product
(GDP), labor compensation has decreased by about 4 percent (from 67 to
63 percent) and corporate profits have increased by about 4 percent
(from 8 to 12 percent) see chart below. After taxes, corporate
profits reached 9.6 percent of GDP the highest level recorded dating
back to 1947.

(Components are percent of GDP; source: graphic adopted from National Economic Trends, St. Louis Federal reserve.)

Over the past year, the overall economy, as measured by GDP, has
grown consistently at a rate of about 5 percent, and is seen by many to
be a sign that the economy has, at long last, come out of the 2001
recession. The conventional wisdom is that increased overall production
will eventually make its way into the pocketbooks of ordinary
Americans. However, this recovery appears to be different in part
because of the dismal performance of employment in the postrecession
period but also because it appears that a lower proportion of
national income is going towards labor.

An economic recovery is not real unless there is widespread
participation in the economy, and the economic benefits accrue to a
broad base of Americans. The current recovery appears to be failing
that test.

Filed under: Data, Economics, Economy, Policy, Recession

GDP Revision

It looks like the BEA has completed their comprehensive revision to the GDP data…
The “big news” is that 200Q3 GDP growth was a slight negative (-0.5%) rather than a slight positive. Clinton-bashers are claiming this as evidence that the recession started pre-Bush.
However, 2000Q4 GDP growth was revised from 1.1% to 2.1% indicating that Bush inherited a stronger economy than previously thought.
Here are all the details about the revision.

Bureau of Economic Analysis: National Economic Accounts
This page has been temporarily changed to reflect the 2003 Comprehensive Revision of the National Income and Product Accounts (NIPAs). This revision replaces all previously published NIPA estimates. The December 10, 2003 release provided estimates from 1929 through the second quarter of 2003. The estimates for the third quarter of 2003 on the revised basis will be released at 8:30 am on December 23, 2003. The following information is currently available. As additional estimates become available, this page will be updated. Please see the release schedule for additional information.

Filed under: Data

Unemployment Up to 6.4%

The Bureau of Labor Statistics today released unemployment figures for June. The unemployment rate rose to 6.4% from 6.1% the previous month.
This (to me at least) was a surprisingly large jump.
In addition, employment levels fell by 30,000 – a further indication of the current weakness in the labor market.
Employment Situation, June 2003

Filed under: Data, Economy, Recession

The Rich are Getting Richer

Data from the IRS shows that the average income of the 400 wealthiest US taxpayers was $173.9 million in 2000. On average they paid 22.4% of their income in taxes.
With recent tax changes, their average tax burden is likely to be even smaller.
According to the Times, “[h]ad President Bush’s latest tax cuts been in effect in 2000, the average tax bill for the top 400 would have been about $30.4 million a savings of $8.3 million, or more than a fifth, according to an analysis of the I.R.S. data by The New York Times. That would have resulted in an average tax rate of 17.5 percent.”
Can I be rich too? Please?
Click for:
Data on the top 400
Data on the returns with income over $200,000

Very Richest’s Share of Income Grew Even Bigger, Data Show
The 400 wealthiest taxpayers accounted for more than 1 percent of all the income in the United States in the year 2000, more than double their share just eight years earlier, according to new data from the Internal Revenue Service. But their tax burden plummeted over the period.
The data, in a report that the I.R.S. released last night, shows that the average income of the 400 wealthiest taxpayers was almost $174 million in 2000. That was nearly quadruple the $46.8 million average in 1992. The minimum income to qualify for the list was $86.8 million in 2000, more than triple the minimum income of $24.4 million of the 400 wealthiest taxpayers in 1992.
While the sharp growth in incomes over that period coincided with the stock market bubble, other factors appear to account for much of the increase. A cut in capital gains tax rates in 1997 to 20 percent from 28 percent encouraged long-term holders of assets, like privately owned businesses, to sell them, and big increases in executive compensation thrust corporate chiefs into the ranks of the nation’s aristocracy.
This year’s tax cut reduced the capital gains rate further, to 15 percent.

Filed under: Data, Economics, Fiscal Policy

Interest Rates at Recod Lows

Key interest rates have hit record lows, going below 1%. I almost wish I had a mortgage so that I could refinince…

Virus Targeting Banks (
T-bill rates fell. The discount rate on three-month Treasury bills auctioned yesterday fell to 1.005 percent, the lowest level since July 28, 1958, from 1.11 percent last week. Rates on six-month bills fell to 0.98 percent, the lowest level since the government began selling these bills on a regular basis in 1958, from 1.095 percent.

Filed under: Data, Economics, Economy, Monetary Policy


Is the NBER’s business cycle dating committee* AWOL?
*Note: the dating committee is not an economists’ “love connection,” but rather the group that follows recessions and announces the dates of the beginning and end of recessions.
They normally release a report once a month clarifying their thinking about the recession, and whether it has (or has not) come to an end.
The most recent report is dated April 10, so an update is over-due. Is the dating committee meeting? Are they ready to declare that the recession has already ended? (The likely date would be sometime in February *2002* as the trough.)
Inquiring minds want to know!
Here is the most recent news relase
Also, GDP has been revised up slighty to 1.9%… not recession, but not very good either. U.S. economic growth revised up in Q1
U.S. gross domestic product, the broadest measure of economic output within U.S. borders, grew at a revised 1.9 percent annual rate in the January-March quarter, in line with Wall Street economists’ forecasts and a revision upward from 1.6 percent estimated a month ago. The first-quarter expansion exceeded the slim 1.4 percent rate of growth posted in the fourth quarter of last year, but still reflects a slow crawl back to growth rates needed to generate more jobs.

Filed under: Data, Economics, Economy, Recession

Recession: Two Year Anniversary

This past month (March) marked the two-year anniversary of the recession that began in 2001.
Some observations…
* If the economy were still in recession, April would be the 25th month of the contraction, making it the longest recession in 100 years (save for the great depression); and more than twice the average duration. See Recession dates and durations. The NBER has not yet made a determination as to whether the recession has ended, or, additionally, if a second one has started.
* Despite a stable 5.8% unemployment rate, employment is still very week. A recent data analysis by the Economic Policy Institute shows that the current recession has an unusually large the decline in private sector jobs two years after the recession began. (See graph below…)
* Overall, the recession is/was rather mild as measured by output reductions. GDP has been slow but positive over the past year. Industrial production has improved significantly from its trough, and real manufacturing and wholesale-retail sales has more than surpassed the March 2001 level. (See NBER’s memo.)
* People in the know are suggesting that the first quarter of this year was particularly weak. Industrial production fell by 0.6% in the past two months after a 0.8% gain in January. However, the relatively quick end of the Iraq war is likely to improve consumer and business confidence – and hopefully this will be reflected in increased consumer spending and higher businesses investment.
* One potentially significant drag on the economy is still the continuing fiscal crisis at the state level which, at the very least, is likely to further harm the employment situation.
* Turning points in the macroeconomic situation are notoriously hard to predict, but I think, despite the current weakness, there is a strong possibility that economy may start to improve in the near future. However, I am fully aware that the lovely spring weather might be biasing me in this regard!

(Click for large version)

How Deep Is the Current Recession?: Archive Entry From Brad DeLong’s Webjournal
The Economic Policy Institute has found a measure according to which the current recession is actually the deepest and most severe of post-WWII recessions. The measure? The percentage by which private employment is below its peak level two years after the recession began: “In the two years since the recession began in March 2001, total payrolls have fallen by 2.1 million and private sector payrolls are down by 2.6 million.”
This is, of course, only part of the story: the current recession is very shallow insofar as production is concerned (in large part because of the rapid underlying productivity growth trend), moderate as far as the unemployment rate is concerned (in part because lots of people have dropped out of the labor force during this recession), and deep as far as private-sector employment is concerned.
Which is the “right” measure? Well, it depends on what you are interested in, of course. A balanced picture of the perhaps-still-ongoing recession needs to comprehend all three…

Filed under: Data, Economics, Economy, Recession, State Economy

The Employment Situation

The employment situation remains poor. Data released by the Bureau of Labor Statistics shows that the unemployment rate for March remains unchanged at 5.8%, and, in addition, total nonfarm payroll employment declined by 108,000 after seasonal adjustment.
Overall, these numbers again point to the idea that the economy is in somewhat of a holding pattern. Overall growth appears to be weak, leading to the decline in employment, yet the unemployment rate has been holding steady at just under 6% for the past year (see graphs below).

Employment Situation
Total nonfarm payroll employment declined by 108,000 in March, while the unemployment rate was unchanged at 5.8 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Employment continued to decline in manufacturing, retail trade, and transportation. Government employment also was down over the month.

Filed under: Data, Economy, Recession

The Investment Situation

The current economic situation in the US continues to be mixed. Employment is weak; GDP growth is slow, but positive; consumer spending is holding up, but confidence is down.
What about investment?
The graph below shows that there were signs of life at the end of last year. I would credit the Fed’s decision to lower interest rates over the past year (and to keep them at low levels) with this beginning of a recovery in investment spending.
Will it continue to recover?
Advance data for the first quarter won’t be released until the end of the month. In the meantime, data shows that Industrial Production has stabilized over the first part of the year. Unfortunately, an investment boom seems to me to be unlikely. Even though interest rates continue to be low, the start of the War in Iraq and general geo-political uncertainty will likely keep investment growth at low levels for the first quarter and into the near future.


Source: Nat Ec Trends, p. 22

Filed under: Data, Economy, Monetary Policy, Recession