The Six Charts I Use To Understand What’s Going on in America
You know what’s really f’ing hard? Trying to have a grasp on the American economy at any given point. There are more than 300 million people in this country and the economy today has never been bigger. I always see headlines about the unemployment rate, or about jobs, but I have yet to really dive deep into the numbers myself. In this post, for my own curiosity and understanding, I want to write down the six things that matter to me. After a ton of research that spanned the price of avocados (I no joke wrote about that once) to the depths of credit card debt, I settled on the following six things. As you read, feel free to highlight or comment on the things you disagree with or like.
The “Real” Unemployment Rate
You see it in headlines, in conversations with friends, or on TV. Everyone is always talking about the unemployment rate. In Government speak that number is called the U-3. It measures people who are in the labor force, looking for work, and still without jobs. But I don’t think it’s right to leave out those who have given up looking for work or are underemployed. That’s why my new favorite reading for this is the “real” unemployment rate. In Government speak it’s called the U-6 and I’m here to tell you it’s better than the U-3:
Jobless Claims
Each Thursday morning, at 8:30 AM ET, this thing called initial claims is released to the world. Initial claims shows how many people are filing for unemployment claims. The more people filing, the more people who are out of work. If the job market is booming, this number is going down. If it’s crashing, this number is going up. The chart below shows unemployment claims since 1967. At this moment, we’re seeing the lowest initial jobless claims since the late 1960s. And back then, the labor force was HALF of what it is today:
Wages in America
In life, money may not be the key to happiness, but in the economy, money is everything. If the economy is producing and everyone is making cash, you most likely have a happy system. If you look hard enough, there several ways to gauge how much money people are making on average. In the end, I settled on something that looks at the inflation-adjusted wages of salary workers over the age of 16. At this present moment, the average salaried worker earns $345 a week and that’s not that impressive when you see that in 1999 and 2000 they were basically earning the same amount:
Financial Obligations
The Financial Obligation Ratio compares the amount of debt to the amount of disposable income. How much of your income goes toward loans from mortgages to credit cards and lease payments? That’s what this looks at, and I found it because someone recently showed me how credit card debt in America is at all-time highs. At first glance, that sounds dangerous. Here we go again… But what if people were making two times the amount of money now with credit card debt at all-time highs than in prior years? Debt only matters relative to income or cash on hand. So this chart shows debt as a percent of income:
Inflation
If you use the US Dollar, or if you save or invest, inflation is arguably the most important thing in your life. Inflation is how fast prices for goods and services are rising. Inflation is why your one dollar from last year is worth less today. If you live in an inflationary economy, holding straight cash is not exactly the smartest thing to do. You want your money to keep up with rising prices. One way to measure the rate of inflation is to look at price changes in goods overtime. There are sticky goods and there are flexible goods. Here’s how the Cleveland Fed breaks those down:
I think you can learn more about the rate of inflation by looking at these baskets separately rather than as one unit. I do not want to see the price of cereal and fruit in the same measurement as the price of rent or public transportation. The price of fruit can whipsaw after one bad natural disaster while the price of public transportation or rent is a little harder to change than that. The chart below shows both of these baskets since the late 1960s. They rarely move up or down together except in times of extreme stress like the Great Inflation of the 1970s:
Wealth Inequality
One of the best investors in the world (link at the bottom) thinks it’s never been harder to get a grasp on the American economy. And that’s because of wealth inequality. It should not be ignored no matter what your political beliefs are. I’m not going to say where I stand, but when I think about the economy, I want to know who’s making the most money and who’s getting squeezed. So this last chart, and sixth data point, shows five quintiles of people and what percent of income they earn of the total income pie. The green line is the top earners in the country, and the blue line is the lowest earners in the country. This trend currently shows no sign of slowing down or reversing:
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