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Business Cycle Indicators as of May 4th
Monthly GDP figures were released by IHS-Markit yesterday, showing a rebound in March. In the context of key macro indicators followed by the NBER Business Cycle Dating Committee:
Net Worth for Bottom 50% and Above
Income distribution statistics come out annually, but net worth (asset/liability) distribution comes out quarterly.
Source: Federal Reserve Board, Financial Accounts of the United States, via FRED.
Diverging Fortunes: US and Euro Area GDP
Euro area GDP continues to drop in Q1, while the US recovery accelerates.
Figure 1: US real GDP (blue), Euro Area 19 real GDP (red), both in logs, 2019Q4=0. Source: BEA, European Union, and author’s calculations.
The US recovery has benefited from a tremendous amount of fiscal stimulus and — finally — a reasonable pandemic response (including an effective vaccination rollout).
The Composition of Consumption
While aggregate consumption has surpassed peak levels, it hasn’t returned to trend. Furthermore, the composition has changed drastically.
Another Minimum Wage Proposal
There’s a rumored plan by Senators Romney and Sinema to raise the minimum wage to $11. Assuming the phase is four years (as in the proposed Cotton plan to raise to $10) starting in June 2021, the trajectory of the real minimum wage looks like:
Retail Sales: Implications for Consumption
Retail sales jumped 9.8% m/m, exceed Bloomberg consensus of 5.9%. Sales ex-food services rose 9.4% in nominal terms, 8.7% if deflated by the CPI-all.
Wisconsin Employment: Employment Drop Revised Away
Wisconsin nonfarm payroll employment has stabilized at a level down 4.9% relative to NBER peak in 2020M02, vs. 5.5% for the nation overall (according to figures released by DWD today). In addition, the downward decline in February of 1.9% (annualized) has been largely revised away — it’s now 0.3% decline (annualized).
CPI Surprise
The CPI came in slightly above Bloomberg consensus (2.6% vs 2.5%), and above the WSJ April survey consensus (shown below).
Employment Surges to 5.5% below Feb 2020
The economy added 916,000 jobs in March, above the Bloomberg consensus of 647,000.
Figure 1: Nonfarm payroll employment (dark blue), Bloomberg consensus as of 4/1 for March nonfarm payroll employment (light blue square), industrial production (red), personal income excluding transfers in Ch.2012$ (green), manufacturing and trade sales in Ch.2012$ (black), consumption in Ch.2012$ (light blue), and monthly GDP in Ch.2012$ (pink), all log normalized to 2020M02=0. Source: BLS, Federal Reserve, BEA, via FRED, IHS Markit (nee Macroeconomic Advisers) (3/1/2021 release), NBER, and author’s calculations.
On the strength of the labor market, see Baum and Klein at EconoFact.