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Welcome to the 9th edition of the Weekly Wrap, where we had a great week scrolling through 1,262 pages of chart-tastic econ data.
The Federal Reserve’s Survey of Consumer Finances. The Greatest.
The Fed’s triennial report on the state of American household finances was released this week. This is one of the greatest gifts to people who enjoy spending weekends building charts. Or people who made bar bets about how many renters vs. buyers own equities (Answer at the end).
It will take years to run through and properly comment on all of this data. But here are three charts that immediately caught our attention.
Median income for those without a high school diploma has surged in the past few years
This was a particularly interesting finding, especially considering the narratives in the 2016 election. Median income for those without a high school diploma jumped 14.7 percent since 2013. For comparison, the median income for those with a college degree rose just 2.1 percent over the same period.
But can we dispel the argument that working-class America is not being left behind, at least in terms of income? Most certainly not.
Since 1989, the median wage has grown the most for the college-educated folks, and stagnated – if not fallen – for other groups:
[table id=3 /]
Another interesting trend is in the median income for families that fall into the college-educated category. While real incomes are up 5 percent since 1989, it is down 8 percent since the 2004 peak. The college wage premium is alive and well, though it might not be as big as it once was.
Incomes in the South and Midwest are Surging
Another finding that runs contrary to the 2016 election zeitgeist, the median income for families is rising fastest in the South and Midwest.
Incomes are still highest for families in the Northeast, but that region saw the slowest growth between 2013 and 2016.
Again, can we dispel the narratives that Trump ran on in 2016 based on this data? Yet again, the answer is no. Incomes (adjusted for inflation) have actually fallen in three of the four regions since 2004. Only in the south is the median family better off than they were 13 years ago.
[table id=4 /]
Incomes for Families in Cities are Rising Much Faster than for Rural Families
Finally, we have a data point that validates the Trump narrative. Families of rural America saw income growth that was just one-fifth of the growth in cities.
This is the continuation of a long-term trend as well. The real (inflation-adjusted) median income for a family in a metropolitan area is 10 percent higher than it was in 1989. For rural families, it’s just 2.7 percent.
One caveat, if we’re going to look at this through the intersection of politics and economics: many suburban counties voted overwhelmingly for Trump. These counties are considered within the range of metropolitan statistical areas. Suburban Cincinnati is a good example. Trump won just 42 percent of votes in Hamilton County. But once you cross the county line, that number jumps into the 60s.
Takeaway: There are some fascinating insights to this report, and we will surely be dissecting it until the next dataset comes out in 2020.
What We Wrote This Week
Loftium Won’t Cause Another Housing Crash, But It Stirs Bad Memories (September 25): “Of course, this one company will never cause a meltdown of the entire nation’s housing market and economy. But it should still be considered from a micro level. If memory serves correct, things didn’t seem to work out too well for either the borrowers or the lenders in Vegas and Phoenix.”
5 Charts That Explain the State of American Manufacturing (September 27): “Manufacturing is not declining, it’s evolving. Productivity in American manufacturing has been the key story of the past few decades. It simply takes fewer workers to produce more goods than it once did. And the goods that are produced are higher quality and of higher value than before.”
The Trump Trade Is Back. Kinda. (September 28): If an entire swath of companies are going to rise and fall based on the latest legislative proposals, then investing in small caps is a bet on Congress getting their act together and passing meaningful legislation. But if we take the past nine months as any kind of indicator, that has some long odds.”
Other Links and Notes
We’re all pass-through entities now. Go incorporate yourself immediately. “It is an important asterisk to one of the core elements of the plan: a desire to tax income of “pass-through” businesses such as partnerships at a rate of only 25 percent. Currently, such income is taxed at the owners’ individual income tax rate, which is as high as 39.6 percent (and would fall to 35 percent in the Republican plan). The Republicans want the pass-through businesses to have a tax rate more in line with that of big, C-class corporations (which they are proposing to tax at 20 percent).” (Tax Plan Punts on a Loophole for the Wealthy; Neil Irwin, New York Times The Upshot)
We wrote about Toronto housing recently; UBS confirms it is bubbly. “Toronto and London are among the cities most at risk of a housing bubble as economic optimism and low borrowing costs push up property values in urban areas worldwide, according to UBS Group AG. The Canadian city, which entered the index of 20 locations for the first time this year, has the most overvalued housing market, while London was the third-riskiest in Europe after Stockholm and Munich, the Swiss bank said in a report published on Thursday.” (Toronto, London Among Riskiest Housing Bubble Cities, UBS Says; Jack Sidders, Bloomberg)
It’s not the fees that will kill you, it’s that you’re a terrible investor. “Those who bought in 2009 and held on until today would be pretty happy, but I get the impression that very few people did that. They either bought too late, sold too early, panicked and puked at the worst possible time, or chased a hot new trend. The result is that they inevitably underperformed a 60/40 mix of stocks and bonds 1 , which would have provided about a 10.4 percent return since the start of 2009.” (Fees Are Not the Enemy of Investors; Jared Dillian, Bloomberg View)
*Survey of Consumer Finances Trivia Question
The answer: 64.6 percent of homeowners and 29.6 percent of renters.
Cover photo: Federal Reserve (Flickr Commons)