Monday, March 17, 2014

I tweaked Troy's graph...

Troy linked to this graph in a comment on Jazzbumpa's Equity Extraction and Personal Consumption Expenditures:

Graph #1: Blue is YOY Job Gains, Troy says, and Red is YOY Consumer Credit Growth
Troy wants us to see the part where the two lines are similar, since about 2002, when employment was pushed up and dragged down by changes in credit use. I see it. But what catches my eye is the time before 2002, when job growth was high and debt growth was low. The "macroeconomic miracle" years.

I tweaked Troy's graph to look at more years, and to look at percent change. I got two lines that run pretty close together except in the 1960s and the 1990s:

Graph #2: Percent Change from Year Ago, Employment (blue) and Consumer Debt (red)
In the 1990s, the blue runs well above the red for near a decade. In the 1960s, the same thing happens. Two particularly good decades, the sixties and the nineties. And Troy's graph shows it.

Good graph, Troy.


Jazzbumpa said...

Graph 2 - the only time CMDEBT runs consistently above PAYEMS is 2000 up to the crash.

I think that means something important.


The Arthurian said...

"Graph 2 - the only time CMDEBT runs consistently above PAYEMS is 2000 up to the crash."

Jazz, I didn't notice that. But you are right. I also think you're right that it means something important. This fits together nicely with your answering Steve Roth's question.

I have a follow-up post, today's post, 18 March, that has a perhaps more useful version of that graph.

I'm not sure how Jim and State of Thought's comments on your post tie into this, except that the problem may be broader than equity extraction alone. Still, you have grasped either the leading edge of it or a conceptual device that moves understanding forward.