News What is wrong with the US economy?

[Jimmy Snyder]

Does the US publish economic data by state? As I'd have thought some states may well not be in recession whilst others are.

This should get you started. http://www.bea.gov/newsreleases/regional/gdp_state/gsp_newsrelease.htm"

 

[Art]

This should get you started. http://www.bea.gov/newsreleases/regional/gdp_state/gsp_newsrelease.htm"

Thanks. I had found a few links but like this one the information is way out of date.

 

[Gokul43201]

Thanks. I had found a few links but like this one the information is way out of date.

Data for 2007 is scheduled for release next week (June 5) by the BEA. And that's as updated as it gets.

http://www.bea.gov/regional/gsp/

 

[edward]

GDP doesn't accurately reflect economic problems in individual states. GDP is weighted heavily towards spending. With the price of gasoline up GDP will go up, but the overall effect on the average person isn't good. For that matter as the cost of food continues to rise GDP will improve. The negative effect of rising prices will in essence make the GDP look better.

There are a lot of factors in flux currently.

http://www.nationalbubble.com/

 

[mheslep]

GDP doesn't accurately reflect economic problems in individual states. ... With the price of gasoline up GDP will go up, but the overall effect on the average person isn't good. For that matter as the cost of food continues to rise GDP will improve. The negative effect of rising prices will in essence make the GDP look better.

GDP numbers are corrected for inflation, so inflationary price pressure which, for instance, make up some of the price of gas and food do not effect GDP. Another check: The run away inflation experienced by many Latin American countries decades ago did not register as increased GDP, indeed the reverse occurred.
http://www.investopedia.com/articles/06/gdpinflation.asp

http://www.nationalbubble.com/

Catchy byline on this site:

exposing the real estate bubble and the greedy people behind it

 

[mheslep]

This should get you started. http://www.bea.gov/newsreleases/regional/gdp_state/gsp_newsrelease.htm"

Wow, Idaho 7.4%, highest in the nation. What is going on out there? I know of some businesses springing up just across the line from Washington, I believe to escape higher taxes.

 

[Jimmy Snyder]

Wow, Idaho 7.4%, highest in the nation. What is going on out there? I know of some businesses springing up just across the line from Washington, I believe to escape higher taxes.

Now that would be interesting. Is there a correlation between tax rates and rates of increase in GDP?

 

[mheslep]

More from the BEA site: The leading portions of the total 7.4% increase:
Durable Goods:2.31% - far and away #1 in the country. Closest is neighbor Oregon w/ 1.9%. Wiki says substantial high tech mfn has moved in there (HP, Dell, Micron)
Retail Trade 0.81
Construction 0.70
Finance Insurance0.41
Agriculture, forestry, fishing, and hunting 0.32

 

[mheslep]

Now that would be interesting. Is there a correlation between tax rates and rates of increase in GDP?

Well Wiki says Idaho sales tax 6%, Income tax 1.8 to 7.8%. However, neighbour Washington has no income tax and a 6.5% sales tax. Might be land values then, a good reason to locate a large mfn plant.

Edit: yes here we go:

Property tax was the first tax levied in the state of Washington and its collection accounts for about 30 percent of Washington's total state and local revenue.

 

[mheslep]

US Today piece Sept 2007
http://www.usatoday.com/news/nation/2007-09-26-Idaho_N.htm

In Idaho, the state with the nation's fastest-growing economy, homebuilding hasn't crashed as it has across much of the USA, and a two-decade run of prosperity continues.

Chalk it up, in large part, to chips — computer chips and potato chips. And to a state whose climate and rugged outdoor beauty are attracting highly mobile, white-collar newcomers who could work or live most anywhere.

Still doesn't clearly explain why business has been drawn there.

Taxes?

The state hasn't tried to woo industry with big tax breaks and subsidies. "We don't play that game," says Republican Gov. C.L. "Butch" Otter, a former executive with agribusiness giant Simplot.

Looks like land is the key:

"The billionaires have chased the millionaires out of Jackson Hole (Wyo.), so they've come over the hills to the Teton Valley to live with us," Hess says.

 

[Gokul43201]

Wow, Idaho 7.4%, highest in the nation.

The hi-tech industry move is one of the factors. Another (which is probably just an outcome of the first) would be the population migration into the cities like in the south-west/mountain-west. Boise is one of the fastest growing cities in the US, with a cumulative growth rate of about 50% since the 2000 census (about 6-7% annualized growth).

 

[Art]

The point I was alluding to is that different perceptions on this board of whether or not the US is in recession would be necessarily coloured by the economy of the state they live in.

 

[russ_watters]

The point I was alluding to is that different perceptions on this board of whether or not the US is in recession would be necessarily coloured by the economy of the state they live in.

That's true, but it goes deeper than that. Regardless of the rate of change of GDP/income, there are some states where the actual income/gdp are much, much higher (and unemployment much lower) than others, recession or not. Here are those numbers:
http://www.infoplease.com/ipa/A0104652.html

So if you had to move from Pennsylvania to Mississippi, for example (I did once), you might think you time-shifted to 1931 and the Great Depression. But conversely, if you move from Mississippi to Pennsylvania (as I also did, thankfully), you might think you suddenly found the Promised Land.

 

[Art]

Here's a good article showing how wage inequality has increased under Bush which would also greatly affect people's perception of the economy.

The end of the American dream?
Analysis
By Steve Schifferes
Economics reporter, BBC News website

The US economy has been generating strong economic growth over the past few years as it has come out of recession.

After growing at more than 3% a year in 2004 and 2005, the pace picked up to a blistering 5.6% annual rate in the first quarter of this year - although the pace has since then slipped back to 2.9%.

So far, though, little of that growth has translated into the hands of the average worker, according to new research from the Economic Policy Institute (EPI).

For real household incomes, the median point - the level at which half of households earn more and half less - has actually fallen over the past five years.
cont'd

http://news.bbc.co.uk/2/hi/business/5303590.stm

From the data in the rest of the article it would appear that since 2000 the poor have indeed being getting poorer both in relative and in absolute terms.

 

[Art]

That's true, but it goes deeper than that. Regardless of the rate of change of GDP/income, there are some states where the actual income/gdp are much, much higher (and unemployment much lower) than others, recession or not. Here are those numbers:
http://www.infoplease.com/ipa/A0104652.html

So if you had to move from Pennsylvania to Mississippi, for example (I did once), you might think you time-shifted to 1931 and the Great Depression. But conversely, if you move from Mississippi to Pennsylvania (as I also did, thankfully), you might think you suddenly found the Promised Land.

I'm not so sure that would affect people's perception Russ. Not unless folk were moving from a high GDP state to a low one or vice versa which would be the exception rather than the rule.

Perception would be based on how you and the people around you are doing this year compared to last and how you expect next year to be.

It's similar to Europe. It doesn't mean a thing to me how Italy's or France's economy is doing as I don't live there. It might make a negligible difference in trade but that's about it.

 

[russ_watters]

From the data in the rest of the article it would appear that since 2000 the poor have indeed being getting poorer both in relative and in absolute terms.

I don't like sloppy wording, especially when I think it is intentional. Here's what they say:

For real household incomes, the median point - the level at which half of households earn more and half less - has actually fallen over the past five years.

We've seen this kind of wording before and I've pointed it out before: it implies a steady decline and a continuing problem when, in fact, that is not the case. I've probably linked this data a dozen times in this thread alone: http://www.census.gov/hhes/www/income/histinc/h01ar.html

As you can see, for households in the middle fifth (the "median point"), incomes were down sharply in 2001 and 2002 following the burst of the internet bubble, but were up in 2003, 2004, 2005, and 2006. It should be expected that it was up in 2007 as well, and finally surpassed 2000 (we'll know for sure in a couple of months when the 2007 data comes out). It's taken longer than it should for incomes to recover, but they are (or were - it is possible they will drop again in 2008) recovering.

The internet boom economy of the '90s is responsible for the unusually low unemployment of 2000 (and thus fast increasing incomes), but when the bubble burst, the mild recession that followed was not then followed by a big, long improvement. Here are unemployment rates by year: http://www.miseryindex.us/URbyyear.asp

That said, incomes in that bracket had a peak in 1979 that wasn't surpassed until 1985 and one in 1989 that wasn't surpassed until 1995. So it isn't at all unusual for incomes to be below their previous peak a 6 year span.

 

[Art]

I hope you are not referring to my wording as sloppy as I am repeating the conclusions of the BBC analyst. Are you saying the following BBC's analysis is wrong?

"The unprecedented split between growth and living standards is the defining economic agenda of the day," says the EPI's senior economist, Jared Bernstein.

During the five years from 2000 to 2005, the US economy grew in size from $9.8 trillion to $11.2 trillion, an increase in real terms of 14%.

Productivity - the measure of the output of the economy per worker employed - grew even more strongly, by 16.6%.

But over the same period, the median family's income slid by 2.9%, in contrast to the 11.3% gain registered in the second half of the 1990s.

The wages of households of African or Hispanic origin fell even faster.

And new entrants to the labour market fared particularly badly.

Average hourly real wages for both college and high school graduates actually fell between 2000 and 2005, and fewer of the jobs they found carried benefits such as health care or company pensions.

The poor performance of the US economy in delivering fuller wage packets may be one reason why the public gives the Bush administration's such a low rating on economic policy.

 

[russ_watters]

I hope you are not referring to my wording as sloppy as I am repeating the conclusions of the BBC analyst. Are you saying the following BBC's analysis is wrong?

I specifically said it was the BBC's wording that was sloppy and was talking about only the point I specifically mentioned - which was the most important point, which is why you commented on only that point in your post.

That said, many of those other points you posted use roughly the same wording. Wordings like "fell even faster" and "over the same period...slid by 2.9%" are the same misleading choice of tone. The sentence that follows that one makes it even worse: they are cherry-picking the timeframes to purposely mislead you about the trends. If you want the real data, all of those are based on the site I posted. Here's the link to the master list of categories: http://www.census.gov/hhes/www/income/histinc/inchhtoc.html

 

[russ_watters]

I'm not so sure that would affect people's perception Russ.

Perhaps. I realize perception and reality are often two completely separate things. But what it does show is that if you are in an economically depressed area, there is a simple (in principle, anyway) solution: move.

 

[russ_watters]

I need to make a correction here:

As you can see, for households in the middle fifth (the "median point"), incomes were down sharply in 2001 and 2002 following the burst of the internet bubble, but were up in 2003, 2004, 2005, and 2006.

I was looking at the wrong income bracket. The incomes did peak in 2000, but they dropped in 2001, 2002, 2003, and 2004, then were up in 2005 and 2006.

Regardless, economics is cyclical and the BBC must know this. The article was written in 2006 and so only includes data to 2005, but they must have known what they were doing: the next upswing had already started in 2005. They must have known that we were starting an upswing, not continuing an extended downward trend.

Here's a graph of the last three cycles for the 3rd income bracket (looks pretty typical to me!). But hey - the cyclical nature of the data wouldn't fit well with the title/purpose of the article, so...

The beginning of the article talks about gdp growth in 2004, 2005, and the beginning of 2006, but then talks about incomes for 1995 - 2005. Why mismatch the data? It implies that the economy has been booming almost continuously from 1995-2005, with incomes falling off that pace for the past 5 years. But oops - they forgot to mention that we had a little recession in there from 2001-2003. So gdp was not rising all that time.

 

[edward]

GDP numbers are corrected for inflation, so inflationary price pressure which, for instance, make up some of the price of gas and food do not effect GDP. Another check: The run away inflation experienced by many Latin American countries decades ago did not register as increased GDP, indeed the reverse occurred.
http://www.investopedia.com/articles/06/gdpinflation.asp


Catchy byline on this site:

Ah but the rise in the price of gasoline in the past year far outstripped inflation. Plus no inflation adjustment is made to individual sectors of the economy.

As people were spending much more on housing in recent years due to a speculative market It gave the GDP a faux boost that was offset very little by any inflation adjustment.

 

[Matthieu]

I believe people tend to overrated the BBC as a reliable source. It's turning more and more popular and concentrate less on facts. It tells the poors in the USA are poorer not because it is the case (and even if that is most likely true) but because BBC's readers want to read that.

 

[doc.madani]

hmmmm...

 

[Art]

I need to make a correction here:
I was looking at the wrong income bracket. The incomes did peak in 2000, but they dropped in 2001, 2002, 2003, and 2004, then were up in 2005 and 2006.

Regardless, economics is cyclical and the BBC must know this. The article was written in 2006 and so only includes data to 2005, but they must have known what they were doing: the next upswing had already started in 2005. They must have known that we were starting an upswing, not continuing an extended downward trend.

Here's a graph of the last three cycles for the 3rd income bracket (looks pretty typical to me!). But hey - the cyclical nature of the data wouldn't fit well with the title/purpose of the article, so...

The beginning of the article talks about gdp growth in 2004, 2005, and the beginning of 2006, but then talks about incomes for 1995 - 2005. Why mismatch the data? It implies that the economy has been booming almost continuously from 1995-2005, with incomes falling off that pace for the past 5 years. But oops - they forgot to mention that we had a little recession in there from 2001-2003. So gdp was not rising all that time.

Hmm so your criticism of the BBC's analysis was based on your own misreading of the information.

Regardless the main thrust of the article is to highlight the growing disparity in wages between the highest and lowest earners and how this has become an issue for politicians from all parties.

Top income earners saw their wages continue to grow uninterrupted throughout the recession whilst the lower earners saw a fall in real incomes. This directly contradicts your oft stated opinion that in absolute terms the poor also always get richer. Evidently in recent years they have not.

As to the reason why, one interesting statistic was the ratio of CEO's earnings to the average wage which has risen from 24 in the '60s to 262 by 2005! Whilst CEO's wages rose between 1992 and 2005 by 186% the hourly pay of the median wage earner rose by a miserly 7.2%. It appears the greedy are getting greedier at the expense of the poor.

 

[mheslep]

Here's a good article showing how wage inequality has increased under Bush which would also greatly affect people's perception of the economy.

http://news.bbc.co.uk/2/hi/business/5303590.stm

The end of the American dream?
Analysis
By Steve Schifferes
Economics reporter, BBC News website

...

For real household incomes, the median point - the level at which half of households earn more and half less - has actually fallen over the past five years.
cont'd

From the data in the rest of the article it would appear that since 2000 the poor have indeed being getting poorer both in relative and in absolute terms.

Never ever rely on uncorrected 'household incomes' as an economic measure, its misleading as the size of households has been steadily decreasing in the US for years, radically so at the lower income levels.

 

[Art]

Never ever rely on uncorrected 'household incomes' as an economic measure, its misleading as the size of households has been steadily decreasing in the US for years, radically so at the lower income levels.

Actually average household size has increased from 2.59 in 2000 to 2.61 in 2006. So never ever allow preconceptions to stand in the way of facts

http://factfinder.census.gov/servle..._name=null&reg=null:null&_keyword=&_industry=

 

[mheslep]

http://www.census.gov/prod/2002pubs/censr-4.pdf" /I]
Page 137

Average household size declined from 4.60 in 1900 to 2.59 in 2000, or by 44 percent.

And this is still an average figure, doesn't address the area of interest - lower incomes where it is more pronounced. Also note the BBC piece refers to an income median point, not an average so I'd expect that statistic to be even more skewed by single parent families.

 

[Art]

http://www.census.gov/prod/2002pubs/censr-4.pdf" /I]
Page 137

And this still an average figure, doesn't address the area of interest - lower incomes where it is more pronounced.

And that is relevant to a discussion on incomes between 2000 and 2006 how?

 

[mheslep]

That in general household income tracked over time is simply a misleading figure. I don't know that the BBC piece is wrong; perhaps hh size has stabilized in recent years. All I've seen here is two data point-years on mean hh size for the entire US; hard or at least risky to assume that holds in the lower income brackets. My point is hh income is just a lousy indicator; what we really want here is per capita income over time.

 

[russ_watters]

Hmm so your criticism of the BBC's analysis was based on your own misreading of the information.

Read the criticism again, Art (the corrected version). The criticism stands.

Regardless the main thrust of the article is to highlight the growing disparity in wages between the highest and lowest earners and how this has become an issue for politicians from all parties.

That's not what you said in your post and it isn't the claim made in the title of the article. You said:

From the data in the rest of the article it would appear that since 2000 the poor have indeed being getting poorer both in relative and in absolute terms.

And that's the part I took issue with (though they didn't say poor, they said middle-wage earners) - the part that is flat wrong. The thesis of the article comes through in the first three paragraphs. It was wrong when they wrote it a year and a half ago and is even more wrong now.

Top income earners saw their wages continue to grow uninterrupted throughout the recession whilst the lower earners saw a fall in real incomes. This directly contradicts your oft stated opinion that in absolute terms the poor also always get richer. Evidently in recent years they have not.

What recession? There has never been a recession that I know of where incomes didn't fall across the board. That includes the 2001 recession and it includes the incomes of the rich, but I didn't expect you to look at the data I linked anyway.

So to save you one mouse click, here is the average income for the top 5% of wage earners for the past few years:

2006--$297,405
2005--$290,373
2004--$281,686
2003--$277,616
2002--$281,317
2001--$296,628
2000--$295,515
http://www.census.gov/hhes/www/income/histinc/h03ar.html

To put that into words, the incomes of the rich dropped from 2001 to 2003 and didn't surpass their 2001 high until 2006. Had the BBC article chosen to cite this data in the same way they cited the data for the middle income, it would have looked like this:

[what they said]For real household incomes, the median point - the level at which half of households earn more and half less - has actually fallen over the past five years.

Cumbersome, but here's what the next sentence could have read if they had chosen to be consistent in their reporting:

The incomes of the top 5% have also fallen over the past five years.

By the way, you either misread or deliberately misstated my assertion about what happens to the incomes of the middle income bracket over time. You can try again if you wish. I'll give you a hint, though: I posted a graph.