Category Archives: News

News about the U.S. real estate market and profession.

Statement from NAHB Chairman Randy Noel on Nomination of Mark Calabria as New FHFA Director

Randy Noel, chairman of the National Association of Home Builders (NAHB) and a custom
home builder from LaPlace, La., issued the following statement on Mark Calabria being
nominated as the new director of the Federal Housing Finance Agency (FHFA):

“NAHB congratulates Mark Calabria on his nomination as the new director of the Federal
Housing Finance Agency. Mark’s extensive experience with housing finance issues provides
an outstanding background for this opportunity. We look forward to working with him to
ensure the nation’s housing finance system retains the appropriate degree of federal
support to provide consistent affordable mortgage credit for home buyers and liquidity and
stability for homeownership and rental housing.”

Original Source

Who pays what in federal taxes?

In principle, we all have to pay taxes. That includes individuals and corporations. The graph attempts to answer the question of how much each source provides in federal taxes. It’s clear that individuals pay the lion’s share (which doesn’t include social security contributions), and the second-largest source is corporations.
The third-largest source is tariffs on imported goods and taxes levied at production. Now, who precisely “pays” these types of taxes is more difficult to determine, as it depends on the price elasticities involved. Let’s say a tariff increases or a new tariff is imposed. Does the seller absorb it or does the seller roll it over to consumers through a higher price tag? The answer depends on how sensitive each party is to price changes.
The smallest source of taxes is the entities abroad category. These entities may be expats filing their income taxes or businesses with some ties to the U.S.

Federal Reserve Source

How expensive is it to service the national debt? : A battle between interest rates and growth rates

The U.S. federal debt has been rising steadily since the Great Recession and is currently 103 percent of GDP. So let’s enlist FRED to help us study the sustainability of this debt by looking at how much it costs to service it.
Neil Mehrotra recently described the cost of servicing public debt as dependent on the gap between the real interest rate on debt and the growth rate of real GDP: This gap captures the difference between the interest the government must pay to its lenders, in real terms, and the pace at which U.S. income increases. If U.S. income increases more rapidly, then interest payments on U.S. debt shouldn’t be a major burden.
The graph plots this measure of the cost of servicing the debt. (Here, the growth rate of real GDP is the sum of real GPD per capita growth and population growth, and the real interest rate is the difference

Federal Reserve Source

The lowdown on loan delinquencies : Rates are lower than pre-recession levels…except for mortgages

We heard a lot about the surge in mortgage delinquencies during the past recession. In fact, many believe this was the origin of the crisis. FRED has delinquency data so let’s see how things look now.
The delinquency rates in the graph show the proportion of loans from the 100 largest U.S. banks that are more than 30 days past due. Mortgage delinquency is now considerably lower than at the height of the Great Recession, but it is still high compared with the two decades prior. In fact, it’s also higher than credit card delinquencies, something that could not have been foreseen before the past recession. The fact that credit card delinquencies are at their lowest recorded levels is part of the explanation, though. Delinquencies on leases and commercial loans are also at their lowest, or close to it, in the past 30 years or so. Thus, the mortgage market still

Federal Reserve Source

Are we moving toward a cashless economy?

There’s a lot of talk that the U.S. is moving toward a cashless economy…at least in the sense that people are using more and more “plastic” (credit and debit cards) for transactions and that cryptocurrencies are becoming more popular. One test of this theory is to look at currency in circulation. If this measure stops growing while the economy is growing, it would be an indication that other forms of money have become more important and are serving as substitutes for currency. The graph above tells a different story: Currency in circulation is consistently growing more than the economy is. (Note: Both are nominal, not “real” inflation-adjusted measures). One caveat: U.S. dollars are also used quite a bit abroad. But dollar use abroad would have to increase much more than the U.S. economy for it to counteract a reduction in domestic currency demand. So it seems the question remains open.

Federal Reserve Source

The unusual duration of unemployment : The scars of the Great Recession

The graph above shows the unemployment rate (right axis) and the average duration of unemployment (in weeks, left axis). It’s well known that the unemployment rate is currently very low. However, the duration of unemployment since the Great Recession has never been longer.* What’s going on?
The graph below has an answer. The share of long-term unemployment is significantly higher than in any other post-WWII period. Indeed, those unemployed for more than 6 months (in green) still represent over 20% of the unemployed, after a peak of over 45% in 2011. This share increases after recessions, but the most recent recession was deeper and much longer than the others. It’s also well-known that the long-term unemployed have a much harder time finding a job, leading to a catch-22 situation for them. And thus their numbers still persist at a high level.

How these graphs were created: Search for unemployment duration and click

Federal Reserve Source

Gold: malleable, ductile, and volatile : Intraday movements in gold prices

Despite appearances, the graph above has two lines. If you look really closely, you can see a second color peeking out here and there. And what two series are these that track each other so closely? One is the daily price of gold in London as of 10:30 a.m. The other is also the daily price of gold in London but as of 3 p.m. You’d expect these prices to be very close to each other, but let’s graph the percentage change between the price at 10:30 a.m. and 3 p.m. to see exactly how similar they are.

In fact, what we have here is a fairly volatile series.* Many of these price changes, which occur within 4.5 hours of each other, are in the range of 1% to 2%. Some even more. This rate of change is about the same as the rate of inflation in the U.S. Such changes in commodity prices aren’t uncommon, of course, even if trading occurs around the clock on world markets. The London market is open 8 a.m. to 5 p.m. (London time). These series are just snapshots during part of that time, but market activity continues in a similar fashion at other times and elsewhere.

How these graphs were created: Search for “gold” and the two series should be among the first choices. Select them and click on “Add to Graph.” For the second graph, start with the first one and use the “Edit Graph” panel to make adjustments: Open the tab for the second series and delete it (click on the trashcan). Then, in the tab for the first series, search for and add the second series and then apply formula (b-a)/a*100.

* NOTE: Because there are many daily observations for the period shown, the graph offers only a sample of them. To see the details, just shorten the sample time.

Suggested by Christian Zimmermann.

The Black Death in the Malthusian economy : A glimmer of wage growth in the Dark Ages

If you’re interested in economic history, does FRED have some data for you! The graph above features some of the oldest data in FRED: population in England and real wages in the United Kingdom, starting in 1086 and 1210, respectively. The big picture shows how dramatic the Industrial Revolution has been in lifting wages and sustaining a much larger population after centuries of stagnation. In fact, the growth has been so strong that we should have used logarithms in the graph (which we’ve recommended in this blog more than once for long time series). Today, though, we focus on a much shorter period: Notice the sharp drop in population in the 14th century? The slider below the graph lets you change the sample period fairly quickly…as does the click-and-drag method within the graph, which we’ve done to create the graph below to highlight this period.

This sudden and massive drop in population is the Black Death, the catastrophic epidemic of bubonic plague that swept through Europe. Notice something else that is quite particular about this period: Real wages went up substantially and clearly stayed higher for a while. This is very different from the period since the Industrial Revolution, where both wages and population have moved in the same direction. One explanation for this deviation is that the earlier period was an era of scant technological progress where population size was constrained by how much the land could produce. Agriculture was not mechanized in any way and suffered from decreasing returns to scale: Each additional agricultural worker was contributing less to total output than the previous one, and thus the average output (mostly food) per person was lower with higher population. This condition leads to a so-called Malthusian equilibrium where population is limited by food availability and famines control population size.

But then the Black Death came and suddenly wiped out a substantial part of the population. Following the above logic, the marginal agricultural worker suddenly is much more productive and wages are higher. Eventually, population increases back to its previous level, and productivity and wages fall back to their initial levels. But for a generation, the survivors of the epidemic enjoyed a higher-than-normal standard of living. It’s only after the technological progress associated with the Industrial Revolution that the economy managed to break out of this vicious cycle.

How these graphs were created: From the FRED homepage, click on the link in the first line of text that displays the number of series in FRED. (At the time of this writing, that number is 528,000.) Then use the sorting feature at the top right and sort the list by starting observation (“Obs Start”). Check the boxes for the population and weekly earnings data series and click on “Add to Graph.” From the “Edit Graph” panel, open the tab for the wage line. Search for “consumer price index in the United Kingdom” and select the oldest series. (The series ID is CPIUKA, which will save you some time searching.) Apply formula a/b. Finally, from the “Format” tab, move the y-axis of one of the series to the right.

Suggested by Christian Zimmermann.

North American divergence in the work week : U.S. manufacturing workers put in more hours than their Canadian counterparts

This graph shows the average weekly hours in manufacturing for two neighboring countries: Canada and the United States. To make the numbers comparable, we made sure to use the same source for both: the Main Economic Indicators of the OECD. (The OECD tries to keep data definitions uniform across member countries, which is often a problem for labor market data.) What’s striking is that both countries looked similar early on in the time series but then diverged. One might assume that, as economies become more intertwined, they would also become more similar. So what’s going on here?

Sadly, we don’t have an answer, but we can list some potential answers. First, economic integration across countries doesn’t necessarily make countries more similar. Indeed, integration provides opportunities for specialization, thanks to comparative advantage. It could be that Canada has specialized in manufacturing sectors where the standards for work hours are lower. Second, labor market legislation may have changed. Indeed, current laws may give workers more bargaining power in Canada than in the U.S. In particular, unions currently have more say in Canada, and their goal is typically to improve the situation of their members (for example, by reducing work hours). Third, the labor practices of these countries that relate to the use of overtime or undertime may have become more different over the years. If employers prefer to use overtime instead of hiring new people, then average hours increase. The opposite happens when workers are given fewer hours instead of being laid off.

How this graph was created: Because the OECD data for the U.S. will not be among the first choices in a typical search, it’s better to search through the data sources to find the OECD. Look for the relevant table for “Main Economic Indicators” for the U.S. and then click on the series name (we took the quarterly seasonally adjusted one). From the “Edit Graph” panel, open the “Add Line” tab and search for the Canadian series to add.

Suggested by Christian Zimmermann.

Does oil drive inflation? : A look at oil's influence over producer prices vs. consumer prices

The price of oil has declined recently, but does that mean prices overall have declined? Let’s see if FRED can help us measure how much connection there is between oil prices and the general price level. The graph above compares oil price inflation and overall price inflation in the U.S. over recent decades. The red and blue lines plot the year-to-year inflation rate corresponding to two of the major aggregate price indexes: the producer price index (PPI) and the consumer price index (CPI). The green and purple lines plot the year-to-year percentage change in two of the major global oil price indexes: the price of Brent crude and the price of West Texas Intermediate (WTI) crude.

The graph shows a strong positive relationship between oil prices and PPI inflation: That is, higher oil prices are associated with higher producer prices and vice versa. Specifically, the correlation between oil prices and the PPI is 0.71. This strong link likely comes from the importance of oil as an input in the production of goods. In contrast, the graph shows a positive but much weaker relationship between oil prices and CPI inflation: The correlation is 0.27, much lower than for producer prices. This weaker link between oil prices and consumer prices likely comes from the relatively higher weight of services in the U.S. consumption basket, which you’d expect to rely less on oil as a production input. If you know what to look for, this difference in correlation is more clearly visible in the scatter plot below: The red dots (PPI and oil) more or less follow a 45-degree line that rises from left to right, which translates into a strong positive relationship between PPI and oil prices. The stream of blue dots (CPI and oil) doesn’t strictly follow a 45-degree line, which reveals a much weaker relationship.

How these graphs were created: Search for “CPI” and click on the series name. From the “Edit Graph” panel, open the “Add Line” tab and search for “PPI,” then click on the series name. Repeat this procedure searching for “oil price” to add the remaining series. From the “Format” tab: Set the “y-axis” position corresponding to the oil price series to “right,” set the “Graph frame” color to white, and set the thickness of each of the lines to 3. For the second graph, from the “Format” tab, change the graph type to “Scatter.”

Suggested by Fernando Leibovici.