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What the Misery Index Can Tell Us About the Health of the US Economy

"The Misery Index grew famous during the candidacy of Jimmy Carter (a man not known for projecting or encouraging misery), and he used it with great effect against his rival in the 1976 presidential campaign. The index was then in the low teens, having come down from the peak of 19.9% it had reached shortly after Gerald Ford took office. Nevertheless, a figure in the low teens still seemed too much to the electorate, and Carter won easily. However, Carter's own Misery Index peaked at 21.98% in June 1980, when the next election was in full swing. Carter was hoisted by his own petard and lost in a landslide."

"Those numbers are worth keeping in mind as we contemplate a current economy frequently referred to in less than glowing terms, and in light of a market that has recently turned hostile on the bulls. Currently, the Misery Index stands at a scant 5.3%, with the latest unemployment figures coming in at 5.1% and inflation at a mere 0.2% for September. That's the lowest the index has been since the spring of 1956 -- the exact point in time when the end of the first season of Happy Days is set. Happy Days first aired in 1974, when the Misery Index was just gaining notoriety."

Misery Index, January 2008-2018

The misery index was initiated by economist Arthur Okun, an adviser to President Lyndon Johnson in the 1960's. It is simply the unemployment rate added to the inflation rate. It is assumed that both a higher rate of unemployment and a worsening of inflation both create economic and social costs for a country. A combination of rising inflation and more people out of work implies a deterioration in economic performance and a rise in the misery index. http://www.miseryindex.us/

Data Sources: Misery Index is the combined Change in the Consumer Price Index for All Urban Consumers: All Items (CPIAUCNS) and
Civilian Unemployment Rate (UNRATE). https://fred.stlouisfed.org/graph/?g=isto

Yearly, Real GDP Growth, 1950-1997

The United States' Gross Domestic Product economy grows at much slower rate then it did during the heady days of the 1950 and 1960s. As an economy grows larger, it naturally becomes more difficult to keep up the rate the growth, but also demographic factors like the aging population and declining births have made it difficult to grow the economy at the rate it once did decades ago. Since the recession, no year has grown faster then 2.9% in 2015, and it's unlikely that we will ever see a year going forward with 4% real growth. Three percent may be the maximum speed that economy grows at anymore, which will have a humbling effect on policy makers hoping to get in more tax revenue, and eventually pose long-term risks to both private and public borrowing, if growth isn't enough alone to pay down past debts.

Data Source: U.S. Bureau of Economic Analysis, Real Gross Domestic Product [A191RL1A225NBEA], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/A191RL1A225NBEA, January 26, 2018.

You often hear from politicians that expanding manufacturing jobs is key to growing the economy. It sounds good, making physical stuff.👷 You can see and touch things that are manufactured. But few Americans actually manufacture things, even though we are outputing  more American-made products then ever before.🏭 American manufacturing is highly automated, it relies less and less on humans.

Americans typically make the most advanced devices and technologies in our country. We outsource lower-skilled manufacturing to other countries.🌏 Low-skilled manufacturing produces lower wages, and those low wages are not enough to pay for a decent living in the United States. Americans expect a good job, one with healthcare and a pension or retirement plan, something that can not be produced with a low-value product.🏥

The future of jobs in America is not in manufacturing. It’s in healthcare, education and creative professions like design, engineering and arts.🎭 The jobs of the future about designing products and providing services that Americans want. Traditionally, many of these jobs have offered less stability and benefits compared to old-line manufacturing.🕴

The solution is not to try to bring back obsolete industries, but instead ensure modern industries in America provide adequate benefits to workers. 🖥This can be done by government mandates or the government providing the service — e.g. opt-in to government retirement or healthcare plans.🙊 The economy is changing, and government shouldn’t stop low-wage jobs from off-shoring, but instead ensure workers are taken care of in the industries of tomorrow.

A new theory for why Americans can’t get a raise.

"The paper—written by José Azar of IESE Business School at the University of Navarra, Ioana Marinescu of the University of Pennsylvania, and Marshall Steinbaum of the Roosevelt Institute—argues that, across different cities and different fields, hiring is concentrated among a relatively small number of businesses, which may have given managers the ability to keep wages lower than if there were more companies vying for talent. This is not the same as saying there are simply too many job hunters chasing too few openings—the paper, which is still in an early draft form, is designed to rule out that possibility. Instead, its authors argue that the labor market may be plagued by what economists call a monopsony problem, where a lack of competition among employers gives businesses outsize power over workers, including the ability to tamp down on pay. If the researchers are right, it could have important implications for how we think about antitrust, unions, and the minimum wage."

The Strange Brands in Your Instagram Feed

"It all started with an Instagram ad for a coat, the West Louis (TM) Business-Man Windproof Long Coat to be specific. It looked like a decent camel coat, not fancy but fine. And I’d been looking for one just that color, so when the ad touting the coat popped up and the price was in the double-digits, I figured: hey, a deal! The brand, West Louis, seemed like another one of the small clothing companies that has me tagged in the vast Facebook-advertising ecosystem as someone who likes buying clothes: Faherty, Birdwell Beach Britches, Life After Denim, some wool underwear brand that claims I only need two pairs per week, sundry bootmakers."

"Perhaps the copy on the West Louis site was a little much, claiming “West Louis is the perfection of modern gentlemen clothing,” but in a world where an oil company can claim to “fuel connections,” who was I to fault a small entrepreneur for some purple prose? Several weeks later, the coat showed up in a black plastic bag emblazoned with the markings of China Post, that nation’s postal service. I tore it open and pulled out the coat. The material has the softness of a Las Vegas carpet and the rich sheen of a velour jumpsuit. The fabric is so synthetic, it could probably be refined into bunker fuel for a ship. It was, technically, the item I ordered, only shabbier than I expected in every aspect."