Economic Statistic of the Decade Award:Finalists

 Economic statistics don’t get enough recognition for all of their hard work. So, I’ve decided to offer an “Economic Statistic of the Decade” Award. The three criteria are simple. First, we want to reward the economic statistic that best reflects the decade (both the good and the bad). Second, we want to recognize the economic statistic that turned in a surprising performance–that is, back in 2000, if someone had shown you a graph of the statistic over the next ten years, you would have said “no way”. Third, we want to reward economic statistics that are reliable and accurate representations of the actual economy.

In the 1990s, for example, the Economic Statistic of the Decade Award would have gone to U.S. productivity growth. The runner-ups would have been Chinese economic growth, followed by global tech spending.

What about this decade? Here are the four finalists (chosen by me):

1) Housing prices
2) Global trade 
3) Chinese growth
4) U.S. household borrowing

Here’s a bit about each of the finalists:
1) The boom and bust in housing prices clearly epitomizes the decade. What’s more, in 2000 nobody in their right mind would have predicted that the boom lasted as long as it did.  Downside: The gyrations in the housing market  may be a symptom of deeper problems, much like a fever is a symptom rather than a disease in its own right   (The chart below is drawn from the Case-Shiller price indexes) 

2) Globalization has been one of the main themes of this decade–and nothing illustrates globalization more than the rise in exports as a share of global GDP.  In 1999, global exports were about 22.7% of global GDP, as measured by the International Monetary Fund.  By 2008, that number was 32. 3% before plummeting in 2009.  Downside:  There may be systematic double-counting, as companies break up production into smaller and smaller pieces.  

3) Chinese economic growth  would have been one of the runner-ups for the Economic Statistics of the Decade for the 1990s.  Chinese economy growth averaged an astounding  10% peryear in that decade, and looks like it’s going to get to the same level again in this decade.  Downside:  No one is really sure whether to trust the Chinese economic statistics or not. 

4) Finally, we come to U.S. household borrowing, which probably is the clearest reflection of the financial crisis.  In this decade the U.S. household sector amped up its borrowing from $500 billion in 1999 to $1.2 trillion in 2006, before dramatically cutting debt  in 2009. Downside: This number from the Federal Reserve includes domestic  hedge funds and nonprofit organizations, making it a bit tough to interpret. 

I will present the winner of the award in a few days.  If you want to vote for one of these, or propose an alternative, go for it!

Comments

  1. Dean Jackson says:

    Of the four, I vote for household borrowing with the international trade stat earning a decent second place. Having said that, the St. Louis Fed’s Mulltiplier says a lot also:

    http://research.stlouisfed.org/fred2/graph/?chart_type=line&s%5B1%5D%5Bid%5D=MULT&s%5B1%5D%5Brange%5D=10yrs

  2. Dude, the graph you’re looking for is here:

    CMDEBT, Household Sector: Liabilites: Household Credit Market Debt Outstanding

    http://research.stlouisfed.org/fred2/series/CMDEBT

    I’ll save you the trouble, hh borrowing peaked ~2q08, and has decreased <2% since then, if memory serves correctly.

    • 7footMoose says:

      Household borrowing overlaid to household liabilities defines the entire financial crisis in two comprehensible graphs. I know that it is not a choice but I opt for combining them into a new graph called JAWS because that is how it will appear. The JAWS of American economic despair.

  3. Gee, shocking alright but even more shocking is that over here in australia the graphs would look the same only the peaks are higher and that is where we are at!, and believe it or not everyone is still talking up house prices and borrowing to the hilt in order to double up at a higher rate after most properties have more than tripled the last 7 years.
    All thanks DIRECTLY to the real estate gurus showing how any moron can make huge dollars out of real estate and spend the rest of thier days lazing on the beach, helped of course by the banks lending money created out of thin air, where else was it going to end?, and have we seen the worst of it?.
    Equity mate!, cars, holidays, computers, plasmas and a dabble in the stock market thanks, all created from on paper valuations.
    It`s been propping up everything.

  4. I’d probably throw in a plot of US stocks over the decade too…

    I actually have a tough time choosing here, since all are inter-related, but I would have to say Chinese growth was the big driver over the decade…it drove most of the others (not caused per say but influenced them for sure). The world and a lot of the economic relationships that we took for granted changed almost overnight after China gained entrance into the WTO…

    Decade goes kind of like this…
    - China gets in the WTO in 2001 and trade explodes…
    - China continues a pegged undervalued currency in this environment and begins to get flooded with dollars and accumulates reserves like nothing anyone could have fathomed or predicted. No one has an issue with this peg so long as the Chinese are comfortable only holding fixed income instruments. Net result, interest rates are so low on Treasuries and ABSs that it begins to be called a “conundrum”… This drives both borrowing and housing higher…
    - Stock market bust in 2000-02 has households looking for an alternative “sure thing.” The shunning of stocks and with China providing the cheap money, households conclude that housing is the new investment that grows to the sky, it’s a low risk levered investment that never goes down. The fire is started, and Wall Street throws on some gasoline…

  5. I’ll vote for U.S. household borrowing and add that I think it is a WONDERFUL sign for the future of our country

    If only Americans can learn to live without phony credit and learn to love severing ties with, and dependence on, our dysfunctional kleptocratic government and the counterfeiting super secretive federal reserve.

    Here’s hoping in 2010 that we can End the FED, End this lie of an economy based on debt and imaginary money so we can experience a cleansing healthy recession/depression and deflation. And ending the decades of corruption, bribery and greed of our politicians.

    Worthy ‘goals’ in my book…

  6. Longer-term view says:
  7. Why did you leave out the most startling of all — the absolute lack of private sector job growth. The implications it represents both economically and politically make these look tepid.

  8. I nominate Hubbert’s Peak. You expected that, didn’t you?

  9. Mike Mandel says:

    Tom: I’ve written a lot about private sector job growth. But I decided that was a symptom and not a cause.

    Ann: Oil production may be the winner next decade.

  10. How about Figure 5 in the essay below on The Oil Drum ?

    http://www.theoildrum.com/node/6025#comments_top

    Figure shows spikes of oil volatility over the last decade and accompanying essay makes the case that these spikes were the ultimate cause of the 2008 financial crisis.

  11. There is rather a simple graph to explain much the current deterioration of the U.S.
    economy, one that many folks would rather not ponder since they are part of the
    problem and do not want to be part of the solution, and that is the rising percentage
    of foreign vehicles and parts purchased in the U.S. in regards to the total sales of vehicles
    and parts here. And that percentage would include cars and trucks built in th U.S. by
    foreign companies, since many, if not most, of the high value components are sourced
    in the manufacturers home country. Here we are dealing with such industries as steel,
    aluminum, textiles, leather goods, electrical components, tires, plastics, computers, glass,
    instrumentation, etc., the list goes on and on. And we wonder why our manufacturing
    base is fast disappearing and our balance of payments is insupportable!

  12. Lost Generation on Deck says:

    A lost decade for U.S. economy, workers
    http://www.washingtonpost.com/wp-dyn/content/article/2010/01/01/AR2010010101196.html?wprss=rss_print/asection
    (excerpts):
    For most of the past 70 years, the U.S. economy has grown at a steady clip, generating perpetually higher incomes and wealth for American households. But since 2000, the story is starkly different.

    There has been zero net job creation since December 1999. No previous decade going back to the 1940s had job growth of less than 20 percent. Economic output rose at its slowest rate of any decade since the 1930s as well.

    Middle-income households made less in 2008, when adjusted for inflation, than they did in 1999 — and the number is sure to have declined further during a difficult 2009. The Aughts were the first decade of falling median incomes since figures were first compiled in the 1960s

  13. I would vote for the Household Borrowing graph. Couldn’t be more indicative of the consumption machine at it’s finest hour and inevitable hangover the day (or decade) after.

  14. I don’t think any of the mooted statistics qualify. The housing bubble may have been surprising but it certainly wasn’t representative. Household net worth may have been inflated by $5-6 trillion because of the housing bubble but that was dwarfed by the overall increase of $23 trillion from 2000 to 2007, before dropping down to a $12 trillion increase now (numbers from the Fed’s Z1 releases), which is almost certainly understated. The best measure will be dug out from that $12-23 trillion increase in net worth, explaining what caused it. International trade was important and that graph is the best candidate of the four but I don’t know that a 30% increase is that surprising or representative. China was a factor but not the most important one and household borrowing was again a small factor. The most relevant to me is how tech did not take off this decade, even though most in the ’90s were expecting it to be much farther along by now, but it’s tough to make an argument for a statistic that didn’t happen, at least until after it does. ;) I’d nominate two other stats instead: the rise in corporate profits this decade and the influx of foreign money parked in the US, whether on Wall Street or into Fannie and Freddie.

  15. Julian,

    Manufacturing jobs are disappearing everywhere, it’s a global trend, not one that is solely confined to the US. Manufacturing output is growing however… This is even true for China, where manufacturing jobs peaked back in the mid 90s…

  16. Though all these charts require some other facts to clarify their messages, it is the fever pace of home price increases that is and was most revealing to me.

    Knowing that household real incomes were stagnant, knowing that the 30% who did not own had to be those who could least afford it, and believing that the population growth rate was inadequate to produce such price escalation — it had to be investors and those with nothing to lose — together these meant that this situation had to lead to disaster. It made Bush’s ownership society look like a mean trick and Greenspan’s push of the public toward alternative loans look like a plot.

    The most frightening revelation in this chart is that home prices are turning upward again without having achieved an affordable level. Every dollar sunk into an overpriced home steals from the rest of the economy and gives to banks, who seem to have lost all sight of their proper role in serving that economy.

    It’s great to find the Mandel determination to probe and ponder once again.

  17. It’s a slam dunk, Household Borrowing. Says it all about the 2000′s.

  18. Congratulation, Mike!

    I Voting by the graph of indebtedness. Accurately reflects the trap of the “American Dream”: consume, consume, consume .. And How? Borrowing, borrowing, borrowing ..

    The fall in international trade (and continued) is a consequence of the above. such as the fall in housing prices. This drop in U.S. consumption, also impacts on China’s GDP.
    That is, the graph of debt is central, and explains the above

    So I wrote “The decade of the end of the American dream” It’s over the end of exacerbated consumption.. Now We will have several years of austerity

  19. I still think China…Maybe China’s GDP growth is not the best statistic to represent this, but something China-esque should win the prize… This chart from Bernanke’s recent speech is very telling and some additional evidence. It shows how capital inflows drove home prices (and household borrowing as well).

    If China a.) doesn’t enter the WTO in 2001 & b.) peg its currency to be so undervalued, I’m not sure that we see either household borrowing or home prices go to the extremes that they did.

    Of Michael’s charts, China is the egg, and all the other stuff is the chicken… I’m arguing that China was the ultimate source of causation for everything else that Michael has listed, making it the most important economic statistic of the decade. I don’t think that there can be a whole lot of debate about it…

    http://blogs.reuters.com/felix-salmon/2010/01/04/what-drives-house-prices/

  20. What’s the cite for where the Fed data is published? Can you provide a link with the graph? Was the graph created by the Fed or you?

  21. james v. waldrep says:

    The graphs do an excellent job in showing the level of activity over time. This is counter to the sound bites and commentary on a year to year analysis by wall street and guest economists.

  22. Average duration of unemployment.

  23. Great work! Those people at your competition (you know who) don’t even have a clue! Let me know if you would like help! I have a Political Commentary site of my own at White Rabbit Cult… I will place a link back to your post. Much Thanks!

  24. Er…Ironymous 2.0 is my blog! What gives?

Trackbacks

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  13. [...] gráfica de Mike Mandel tiene la particularidad de sintetizar la actual crisis desde sus mismos orígenes. Aquí está el [...]

  14. [...] Stat of the Decade: Mike Mandel offers four candidates for statistic of the decade. ” 1) The boom and bust in housing prices clearly epitomizes the decade. What’s more, in 2000 nobody in their right mind would have predicted that the boom lasted as long as it did. Downside: The gyrations in the housing market may be a symptom of deeper problems, much like a fever is a symptom rather than a disease in its own right. 2) Globalization has been one of the main themes of this decade–and nothing illustrates globalization more than the rise in exports as a share of global GDP. In 1999, global exports were about 22.7% of global GDP, as measured by the International Monetary Fund. By 2008, that number was 32. 3% before plummeting in 2009. Downside: There may be systematic double-counting, as companies break up production into smaller and smaller pieces. 3) Chinese economic growth would have been one of the runner-ups for the Economic Statistics of the Decade for the 1990s. Chinese economy growth averaged an astounding 10% peryear in that decade, and looks like it’s going to get to the same level again in this decade. Downside: No one is really sure whether to trust the Chinese economic statistics or not. 4) Finally, we come to U.S. household borrowing, which probably is the clearest reflection of the financial crisis. In this decade the U.S. household sector amped up its borrowing from $500 billion in 1999 to $1.2 trillion in 2006, before dramatically cutting debt in 2009. Downside: This number from the Federal Reserve includes domestic hedge funds and nonprofit organizations, making it a bit tough to interpret.” [...]

  15. [...] global trade, China’s growth or US household borrowing? Economist Michael Mandel presents his four most important economic graphs of the decade. I offer one more. 1) The boom and bust in housing prices clearly epitomizes the decade. [...]

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