Data source for all slides are from the Bureau of Economic Analysis unless otherwise indicated. See for data sources.

Transcription

1 The National Income and Product Accounts (NIPA) 2018 Gary R. Evans. This slide set by Gary R. Evans is licensed under a Creative Commons Attribution- NonCommercial-ShareAlike 4.0 International License. Data source for all slides are from the Bureau of Economic Analysis unless otherwise indicated. See for data sources.

2 What I intend to show This is a consumption-driven economy 2. We import a lot more than we export 3. Economic growth has been robust in my lifetime, about 3.5%... but slower in the last few years ( ). 2018) 4. The bulk of national income is in wages and salaries, but those are stagnant. 5. We have become much more of a service (financial, health, legal, education, insurance, etc.) economy and less of a manufacturing and agricultural l economy (in terms of value produced) and that trend is not reversing. 6. We don't savemuch (at the personal level).

3 Refer to large printout of this same chart... All data shown from the slides that follow are from the National Income and All data shown from the slides that follow are from the National Income and Product Tables, National Data, from the Bureau of Economic Analysis,

4 Major Components of GDP: 2017Q3 (billions $, annualized data) Total: 19,500.6 billion

5 NIPA Accounts: 2017Q3 GDP $ trillion ,000 Services 6,000 Nondurable goods 4, ,000 Durable goods Exports S&L Govt ,000 Equipment and Software Residential Construction Nonresidential Construction Intellectual Property Products Change in Business Inventories Imports Federal Govt -4,000

6 These NIPA categories Real GDP adjusts monetary GDP by removing inflation (the data are deflated by statistics called the chain-type price indexes). Services include financial, health, recreational, transportation, housing, and education. Consumer durables are "big ticket" goods like autos and furniture, often purchased with credit. Residential i linvestment reflect the value of new home construction, so this spending in not included in consumption. Change in business inventories are small, may be positive or negative, and are sometimes early indicators of recession when they grow, but deep in a recession can turn strongly negative. Government spending in both categories does not include transfer payments like Social Security.

7 The two primary problems areas in the last recession (and key to recovery): Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Durable Goods Residential Construction Data shown are annualized quarterly growth rates of durable goods and residential construction, 2006-I to 2017-III

8 The Statistical Difference Between GDP and National Income (and don t worry, you re not required to know this) Gross Domestic Product plus Receipts of overseas income less Payments to overseas income equals Gross National Product less Consumption of Fixed Capital equals Net National Product less Indirect Business Taxes and Tax Liability less Business Transfer Payments less Statistical Discrepancy plus Subsidies less current surplus of government enterprises equals National Income

9 National Income and its Disposition: 2017 Q3 16% Wage and Salary Compensation 6% Proprietors income 8% 4% 58% Rental income Interest income Dividend income 8% Government transfer Government transfer benefits

10 But income is stagnating!!!.. and that has turned out to have profound political repurcussions.

11 Real GDP Growth: Average: % Q1-Q3: 1.2%, 3.1%, 3.2% Below 0.0% for 2 consecutive quarters is a recession Source: Bureau of Economic Analysis, National Income and Product Accounts

12 Significant Trends in Consumption The growth of the service economy (health, financial, insurance, education, government, 50 communication) and less of a goods economy 45 (manufacturing, textiles, food, etc.) Services Durable goods Nondurable goods

13 We don't save (much) Personal Savings as a % of Disposible Personal Income Falling through the 80s and 90s as we used credit cards, but then rising as credit cards were being paid down in recession. This is a key "recovery" variable Now at 3.3% in 2017 Q3!

14 About savings Personal savings is equal to gross personal savings less new consumer debt (which explains how it can be negative). Usually a "decline" in the savings rate represents an increase in the use of debt rather than a decision to reduce savings. Personal savings quarterly turned negative for the first time in We have high levels of gross personal savings in the form of institutional savings 401Ks, IRAs, other retirement t vehicles, and fairly high discretionary savings by upper-income individuals. We have high levels of business savings in the U.S. and very high levels of "global savings" overseas.

15 Our conclusions This is a consumption-driven economy 2. We import a lot more than we export 3. Economic growth has been robust in my lifetime, about 3.5%... but slower in the last few years ( ). 2017) 4. The bulk of national income is in wages and salaries, but those are stagnant. 5. We have become much more of a service (financial, health, legal, education, insurance, etc.) economy and less of a manufacturing and agricultural l economy (in terms of value produced) and that trend is not reversing. 6. We don't savemuch (at the personal level).

16 Additional information... A Guide to the National Income and Product Accounts of the United States, Bureau of Economic Analysis, Sept Detailed description of NIPA accounts and appendix about how chain-price indexes are constructed. Measuring the Economy: A Primer on GDP and the National Income Accounts, Bureau of Economic Analysis, Sept Has more about how to obtain the data. Taking the Pulse of the Economy: Measuring GDP, Landefeld, Seskin, & Fraumeni, Journal of Economic Perspectives, Spring Detailed description of methods and NIPA classifications. Available on the BEA site at