October Economic Roundup
The destruction of private wealth and public infrastructure caused by hurricanes Harvey and Irma is roughly $200 billion. The impact on GDP growth will critically depend on how fast refineries in Houston and tourism in Florida recover, along with how much insurance money and government disaster assistance arrives. 17Q3 GDP will be three-quarters of one percent lower, with compensating boosts in later quarters. The long-run effects will be zero.
Since 1977, there have been 11 federal government-wide shutdowns. Nine times those shutdowns have lasted three days or less, once, in 1995, it lasted six days. The shutdown in 2013 lasted the longest, 16 days, but most Defense Department workers returned to work after six days. There have also been seven partial or technical shutdowns. The shortest of those was eight days and the longest 21 days.
The US economy grew at a strong 3% during 17Q2, up from an earlier estimate of 2.6%. The improvement was the result of significantly stronger consumer spending, and this is a very important private investment! As the labor market tightens and wages rise, firms appear to be finally boosting capital expenditures significantly, which should raise labor productivity. However, economy-wide inflation remains MIA, and while 3% growth rocks, it’s not sustainable long-term.
While durable goods orders fell 6.8% in July, ex-transportation orders (which exclude aircraft orders as they are profoundly mercurial), were up 0.5% M-o-M and 5.6% Y-o-Y. Better yet, Y-o-Y ex-transportation orders are growing at their best pace since 12Q1. Relatedly, core capital goods, which exclude defense and transportation, and are a good proxy for business investment, have risen in six of the last seven months. Firms are happier!
Median household income rose 3.2% in 2016 to $59,039, finally surpassing the previous inflation-adjusted record of $58,665 set in 1999, yes 1999! In addition, the male-female wage gap narrowed from 79.6% in 2015 to 80.5%, and the poverty rate declined to 12.7%. In 2000, it was just 11.3%, close to the record 1972 low of 11.1%. Poverty is currently defined as an income below $24,563 for a family of four.
In 2016, the Tooth Fairy left an average if $4.66, up from $3.91 in 2015. In total, tooth fairies left $290.6 million! First teeth are especially valuable, bringing in an average of $5.72. The tooth fairy visits 85% of the nation’s households with children. Payouts are highest in the West at $5.96, followed by the Northeast at $5.06, the South at $4.57, and the Midwest at $4.04.
Source: Elliot Eisenberg, PhD., Chief Economist for GraphsandLaughs, LLC, an economic consulting firm serving a variety of clients across the United States. All rights reserved.