19/9/16: US Median Income Statistics: Losing One's Head in Cheerful Releases

In our Business Statistics MBAG 8541A course, we have been discussing one of the key aspects of descriptive statistics reporting encountered in media, business and official releases: the role that multiple statistics reported on the same subject can have in driving false or misleading interpretation of the underlying environment.

While publishing various metrics for similar / adjoining data is generally fine (in fact, it is a better practice for statistical releases), it is down to the media and analysts to choose which numbers are better suited to describe specific phenomena.

In a recent case, reporting of a range of metrics for U.S. median incomes for 2015 has produced quite a confusion.

Here are some links that explain:

• http://davidstockmanscontracorner.com/ analysis of the data: http://davidstockmanscontracorner.com/deconstructing-median-income-bs/
• Charles Hugh Sith's analysis of the same set from a similar angle: http://charleshughsmith.blogspot.com/2016/09/fun-with-fake-statistics-5-increase-in.html
• Confirming the above, WallStreetExaminer.com: http://wallstreetexaminer.com/2016/09/chart-day-5-2-household-income-gain-vs-reality/ and a the same with links to original release of data: http://wallstreetexaminer.com/2016/09/median-household-income-rose-5-2-yeah-thats-ticket/
• The above are contrasted by the NYTimes coverage: http://www.nytimes.com/2016/09/14/business/economy/us-census-household-income-poverty-wealth-2015.html?_r=0 and Bloomberg view: http://www.bloomberg.com/news/articles/2016-09-13/u-s-poverty-rate-falls-to-post-recession-low-as-incomes-gain

So, as noted on many occasions in our class: if you torture data long enough, it will confess... but as with all forced confessions, the answer you get will bear no robust connection to reality...

Economics 29/01/2010: US Economy Blistering Growth

US GDP grew at annualized rate of 5.7% in real terms in Q4 2009 (q-o-q growth), according to the "advance" estimate released by the Bureau of Economic Analysis. This is a massive jump on 2.2% real rise in Q3 2009.

Q4 increase reflected gains in private inventory investment (two consecutive quarters rise), exports, and personal consumption expenditures (PCE). Imports, which reduce GDP, also increased in Q3, signaling improved consumer and producer (intermediates) demand, but the rate of growth fell in Q4. An upturn in nonresidential fixed investment was partially offset by slowdown in federal government spending.

Real personal consumption expenditures increased 2.0% in Q4, down from an increase of 2.8% in the third quarter. Durable goods decreased 0.9%, in contrast to an increase of 20.4% in Q3 2009. Nondurable goods increased 4.3%, compared with an increase of 1.5% in Q 3. Services increased 1.7%, compared with an increase of 0.8% in Q3. This suggests rather anemic holidays season and potential reversal in consumer confidence (see below). It certainly does not add up to a robust change in the crisis-driven increases in marginal propensity to save (up 4%+ in Q4) and enhanced risk-aversion (keeping durables sales down).

Real nonresidential fixed investment increased 2.9% in Q4, in contrast to a decrease of 5.9% in Q3. Nonresidential structures decreased 15.4%, compared with a decrease of 18.4%. Equipment and software increased 13.3 percent, compared with an increase of 1.5 percent. Real residential fixed investment increased 5.7 percent, compared with an increase of 18.9%. All indicating the beginnings of a new business investment cycle - a very good sign.

A note to European policy makers: weaker currency works magic: real exports of goods and services increased 18.1% in Q4, compared with an increase of 17.8% a quarter earlier. Real imports of goods and services increased 10.5%, compared with an increase of 21.3%. This again points to depressed consumer rebound, but it also signals that inventories rebuilding might have been completed by now - a sign that we might expect much weaker contribution to GDP growth from that side of the NA in the next 2-4 months.

Stimulus is thinning out and rapidly, but on the military spending side, not in civilian consumption. Real federal government consumption expenditures and gross investment increased 0.1% in the fourth quarter, compared with an increase of 8.0% in the third. But non-defense spending increased 8.1%, compared with an increase of 7.0% in Q3.

Another lesson to European leaders: cut taxes and see things grow faster. Current-dollar personal income increased $119.2 billion (+4.0%) in Q4, compared with an increase of $35.1 billion (1.2%) in Q3. Personal current taxes decreased $11.7 billion, in contrast to an increase of $3.5 billion in Q3. Thus, disposable personal income increased $130.8 billion (+4.8%) in the fourth quarter, compared with an increase of $31.6 billion (+1.2%) in the third.

The miracle that is the resilient US economy is about to swing into action, assuming no adverse news on the Federal Reserve side.

Charts on Consumer Confidence finding upward support, again... over the downward cycle
but not over a deviation from historic trend...
not yet. Which means that we are now in the optimistic (exuberantly) territory relative to historic trends:
and

Economics 26/06/09: US Personal Income

US Personal Income increased $167.1bn, (+1.4%), and disposable personal income (DPI) increased $178.1bn, (+1.6%) in May, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $25.1bn, (+0.3%). In April (revised estimates), personal income increased $78.3bn, or 0.7%, DPI increased $140.0bn, or 1.3%, and PCE increased $1.0bn, or less than 0.1%. But don’t hold your breath for the trumpets of recovery: per BEA “the pattern of changes in personal income and in DPI reflect, in part, the pattern of increased government social benefit payments associated with the American Recovery and Reinvestment Act of 2009”.

How big is this ‘in part’? Provisions of the Act reduced personal current taxes and increased government social benefit payments. The ARRA of 2009 provides for one-time payment of $250 to eligible individuals receiving social security, supplemental security income, veterans benefits, and railroad retirement benefits. These benefits boosted the level of personal current transfer receipts by $157.6bn at an annual rate in May.

Excluding these special factors, which are discussed more fully below, DPI increased $20.6bn, or 0.2%, in May, following an increase of $101.3bn, or 0.9%, in April. So things are getting worse not better. Uncle Sam is doing the job (no hope here for Ireland), but any real (non-fiscal stimulus) growth is still way off.

• Private wage and salary disbursements decreased $12.4bn in May, compared with a decrease of $0.7bn in April = DOWN trend
• Goods-producing industries' payrolls decreased $12.9bn, compared with a decrease of $12.2bn = DOWN trend;
• Services-producing industries' payrolls increased $0.5bn, compared with an increase of $11.5 bn = DOWN trend.
• Government wage and salary disbursements increased $3.9bn, compared with an increase of $5.7bn = DOWN trend.
• Supplements to wages and salaries increased $3.3bn in May, compared with an increase of $3.9bn in April = DOWN trend.
• Proprietors' income increased $0.4bn in May, compared with an increase of $3.1bn in April = DOWN trend.
• Nonfarm proprietors' income decreased $0.2bn, in contrast to an increase of $0.5 bn = DOWN trend.
• Rental income of persons increased $5.2bn in May, compared with an increase of $4.9bn in April = UP trend.
• Personal income receipts on assets (personal interest income plus personal dividend income) increased $2.5bn, compared with an increase of $2.6bn = slight DOWN trend.
  

Good news, Americans are paying less in taxes: Personal current taxes fell $11.1bn in May, compared with a decrease of $61.6bn in April. The Making Work Pay Credit provision of the ARRA of 2009 (allowing a refundable tax credit of up to $400 for working individuals and up to $800 for married taxpayers filing joint returns) reduced personal current taxes by $49.8bn at an annual rate in both May and April, and $11.2bn in March.

Thus, disposable personal income (DPI) -- personal income less personal current taxes -- increased $178.1bn (+1.6%) in May, compared with an increase of $140.0bn (+1.3%) in April. So here we do have a meaningful improvement.

And that was reflected in personal outlays too. Personal outlays increased $17.9bn in May, in contrast to a decrease of $6.3bn in April. PCE increased $25.1bn compared with an increase of $1.0bn.

Personal saving -- DPI less personal outlays -- was $768.8bn in May, compared with $608.5bn in April. Personal saving as a percentage of disposable personal income was 6.9% in May, compared with 5.6% in April. Precautionary savings motive is still working through American balance sheets, but consumption is sloping up and loans repayments are going on still at a healthy rate. America is saving, deleveraging and getting better, although for now primarily thanks to tax-cutting and stimulus spending Federal Government…