Political Calculations' initial estimate of median household income in August 2023 is $76,201, an increase of $181 (or 0.24%) from the revised estimate of $76,020 in July 2023.

After adjusting for inflation, the typical American household lost ground in August 2023. In terms of constant August 2023 U.S. dollars, median household income rounds to $76,352 in July 2023, with August 2023's income estimate coming in 0.2% lower.

These figures are substantially different from what we last reported in the previus edition of our regular median household income series. In between then and now, we've verified median household income has been growing much more slowly in the period since March 2021 than it did during the six prior years thanks to new data released by the U.S. Census Bureau in September 2023. Our previous estimate was based on that previous trend.

The latest update to Political Calculations' chart tracking Median Household Income in the 21st Century shows the nominal (red) and inflation-adjusted (blue) trends for median household income in the United States from January 2000 through August 2023, including the new, more slowing growing trend established in the period since March 2021. The inflation-adjusted figures are presented in terms of constant August 2023 U.S. dollars.

The nominal (non-inflation adjusted) data shows the slower growth of median household income since March 2021, rising from $67,404 (unchanged in our revision) to August 2023's initial estimate of $76,201.

The inflation-adjusted data however indicates U.S. median household income has generally declined since peaking in April 2020 at $79,772 in terms of constant August 2023 U.S. dollars. That decline has only continued in the period since March 2021, falling from that month's inflation-adjusted estimate of $78,130. August 2023's initial estimate of $76,020 is 2.7% below that level and is on a still falling trendline. The answer to the question of why so many Americans are unhappy with the economy of the last few years has an obvious answer.

Analyst's Notes

If verifying the new, more slowly growing trend for non-inflation adjusted median household income using the Census Bureau's latest data wasn't enough, the BEA also executed substantial revisions to the aggregate earned income estimates we use in developing our median household income estimates.

Those revisions affect the period from March 2018 through July 2023. The next chart shows how the aggregate income data changed:

Describing the changes generally, the BEA revised the data for most of 2020 and 2021 upward the data for 2022 substantially downward. Since December 2022, the BEA made significant upward revisions to its estimates for this data series.

If you're curious how we generate our estimates of median household income, we last updated our methodology in September 2023. We also periodically compare our estimates with other nominal estimates, where our updated model reflecting the slower growth of median household income is currently closely tracking the Atlanta Fed's modeled estimates.

References

U.S. Bureau of Economic Analysis. Table 2.6. Personal Income and Its Disposition, Monthly, Personal Income and Outlays, Not Seasonally Adjusted, Monthly, Middle of Month. Population. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 31 August 2023. Accessed: 31 August 2023.

U.S. Bureau of Economic Analysis. Table 2.6. Personal Income and Its Disposition, Monthly, Personal Income and Outlays, Not Seasonally Adjusted, Monthly, Middle of Month. Compensation of Employees, Received: Wage and Salary Disbursements. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 31 August 2023. Accessed: 31 August 2023.

U.S. Department of Labor Bureau of Labor Statistics. Consumer Price Index, All Urban Consumers - (CPI-U), U.S. City Average, All Items, 1982-84=100. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 10 August 2023. Accessed: 10 August 2023.

Image credit: Photo by Emil Kalibradov on Unsplash.

The S&P 500 (Index: SPX) dropped 0.7% from its previous week's close to end the third calendar quarter of 2023 at 4288.05.

The main reason the market fell during the final week of 2023-Q3 is the developing consensus the Federal Reserve will hold interest rates higher for longer because inflation has not yet been adequately suppressed.

We looked for signs a looming shutdown of nonessential federal government operations at the end of its fiscal year was negatively impacting stock prices, but given the long-running dysfunctionality of Washington, D.C., news related to this year's looming shutdown contributed imperceptible levels of noise to the trajectory of stock prices. The past week's news related to the looming shutdown has not affected stock prices in any meaningful way.

Speaking of which, the trajectory of the S&P 500 remains well within the latest redzone forecast range shown on the dividend futures-based model's alternature futures chart, though trending down into the lower portion of it.

The trajectory of the latest redzone forecast range itself has similarly altered its trajectory downward since we first introduced it several weeks ago, coinciding with rising expectations the Fed will hold interest rates higher for longer than investors were expecting when we first drafted it.

Looking forward, we'll update this chart one last time before rolling out a first look at the alternative futures chart for 2023-Q4, which will take us through the end of the year.

Here's our recap of the meaningful market moving news headlines for the final week of 2023-Q3:

Monday, 25 September 2023

• Signs and portents for the U.S. economy:
• Oil prices settle near flat in choppy trade; Russia eases fuel export ban
• Traders calling foul on Fed minions' bluff, Fed minions may have added to financial instability, suggest they may seek another rate hike:
• Why traders aren't buying the Fed's 'higher-for-longer' vision
• Hawkish Fed unwittingly stokes Treasuries 'basis trade' risks: McGeever
• Fed doves, Fed hawks: US central bankers in their words
• Fed's Kashkari sees another rate hike, then a hold
• Bigger trouble, stimulus developing in China:
• China central bank adviser proposes structural reforms to revive economy
• Even China's 1.4 billion population can't fill all its vacant homes, former official says
• Bigger stimulus developing in Japan, BOJ minions
• Japan to compile economic package to ease inflation pain
• ECB minions thinking about sitting on their hands again:
• ECB needs to be cautious about doing too much on rates - Villeroy
• Oil price spike does not change ECB's view on inflation-Villeroy
• Wall Street posts gains as investors eye rate outlook

Tuesday, 26 September 2023

• Signs and portents for the U.S. economy:
• Oil prices rebound, settle higher on worries about tight supply
• Cushing oil stocks lowest in more than a year spark quality, price concerns
• US yields at 2007 levels crimp stocks, while yen sirens blare
• US new home sales tumble in August
• Most dovish Fed minion says betting odds of higher rates are rising:
• Fed's Kashkari: 40% chance of needing 'meaningfully' higher rates
• Signs China's stimulus efforts are getting traction:
• China powers global aluminium output to record high: Andy Home
• China's industrial profits rebound in August but extend slump for Jan-Aug
• BOJ minions to keep never-ending stimulus alive longer:
• BOJ may hold off on ending negative rates until April - ex-board member
• Bigger trouble developing in Eurozone:
• Lack of momentum to weigh on German economic growth in 2024 - IMK institute
• Exclusive-German economic institutes forecast 0.6% GDP contraction this year - sources
• Wall St pounded as investors grapple with higher rates
• S&P, Dow slump to lowest close since early June amid rate concerns; May-end for Nasdaq

Wednesday, 27 September 2023

• Signs and portents for the U.S. economy:
• Oil climbs 3% as steep US crude stocks draw adds to supply concerns
• US durable goods orders beat expectations in boost to economy in third-quarter
• Fed minion says they don't think they've beaten inflation yet, BofA CEO says they have, Reuters mouthpiece says they need to move goalposts to accept higher inflation:
• Fed's Kashkari: Unsure if Fed has hiked enough to bring inflation to target - CNBC
• Bank of America CEO says Fed has won the near-term battle against inflation
• When is success not success? When Fed gets inflation down to 2.5%: McGeever
• "Precise, forceful" stimulus developing in China:
• China's central bank to use 'precise, forceful' policy to bolster recovery
• BOJ minions becoming less sure about keeping never-endng stimulus policy alive:
• BOJ minutes show deviating views on future policy direction
• BOJ's July debate highlights rift in view on rate hike timing
• ECB minions claim they may not be done with rate hikes, excited to shrink money supply:
• ECB not necessarily done with rate hikes: Elderson
• Euro zone money supply shrinks as ECB turns off taps
• Euro zone 2024 fiscal tightening seen limited by slowing economy
• S&P 500 ekes out slim gain as investors weigh elevated yields

Thursday, 28 September 2023

• Signs and portents for the U.S. economy:
• Oil eases 1%, reversing rally, on profit taking, interest rate worries
• Bridgewater's Ray Dalio warns of impending debt crisis in US - CNBC
• US GDP revised down in every first quarter from 2020 to 2022
• Fed minions say they're not sure what way they'll go with rate hikes:
• Fed's Barkin says more data needed before making next monetary policy call
• Fed's Goolsbee sees risk of 'error in view that low inflation needs high unemployment
• Signs of stimulus getting traction in China:
• China's factory activity probably steadied in September
• Bigger trouble developing in the Eurozone:
• German Chancellor says economy is facing cyclical downturn- Wirtschaftswoche
• German GDP expected to contract 0.6% this year - economic institutes
• Wall St ends higher as investors digest economic data ahead of inflation report

Friday, 29 September 2023

• Signs and portents for the U.S. economy:
• Oil settles lower but ends quarter up 28% on tight global supply
• US inflation outlook brightens as underlying price pressures subside
• Instant view: US core inflation slows in August, consumer spending rises
• Fed minions keep playing "will they or won't they" on rate hikes:
• Fed doves, Fed hawks: US central bankers in their own words
• Fed's Williams says central bank may be done with rate rises
• What could break under higher-for-longer interest rates?
• BOJ minions told to keep deflation from coming back:
• Japan's economy minister says authorities must ensure end to deflation
• ECB minions get good news and bad news:
• Euro zone inflation falls to lowest in 2 years as economy slows
• German unemployment rises less than expected in September
• German retail sales fall unexpectedly in August
• S&P 500 dips after US inflation data, ending weak third quarter
• Nasdaq, S&P, Dow end mixed, wrapping up worst month for markets since December

The CME Group's FedWatch Tool continues to project the Fed will hold the Federal Funds Rate steady in a target range of 5.25-5.50% through July (2024-Q3). Starting from 31 July (2024-Q3), investors expect deteriorating economic conditions will force the Fed to start a series of quarter point rate cuts at six-to-twelve-week intervals through the end of 2024.

The Atlanta Fed's GDPNow tool's forecast of annualized real growth rate during 2023-Q3 held steady for a second consective at +4.9%.

Image credit: Photo by kaleb tapp on Unsplash.

The Global Carbon Budget offers a wealth of data on carbon dioxide emissions. That includes estimates of how CO₂ each nation has emitted into the Earth's atmosphere in each year since 1850. At least, for the period for which records are available for the various nations.

When that historical data is presented, it's almost always given in terms of the total emissions emitted over that time for a given territory. Which is misleading, because not all that previously emitted carbon dioxide is still in the Earth's air. A significant fraction of it [has been taken out of the atmosphere, absorbed by various carbon sinks on land and sea.

We wondered how much of the carbon dioxide in the air today originating from fossil fuels could be attributed to various nations or territories. To find out, we tapped the Global Carbon Budget's territorial data to find out how much has been emitted by several nations or regions of interest and how much has been removed from the air over the years from 1850 through 2021. The following chart illustrates our results:

The next chart gives the percentages of each nation's or region's fossil fuel-based carbon dioxide emissions that are still present in the atmosphere.

Perhaps the most surprising result is for the United Kingdom. The portion of the U.K.'s CO#&8322; emissions that are still present in the air is less than half it's total emissions since 1850. This outcome owes a lot to the United Kingdom's leading role in the industrial revolution. The U.K. initially dominated global carbon dioxide emissions, but its relative contribution has declined over time as other nations and regions industrialized. As time has passed, most of the U.K.'s historic carbon dioxide emissions from consuming fossil fuels have been absorbed from the atmosphere.

A similar pattern is playing out with the regions of the European Union and the United States, which also industrialized early. Meanwhile, nations like China and India that are among today's sources for increasing CO₂ emissions industrialized much later, which is why a larger share of their historic emissions are still in the atmosphere.

What does that mean for the Earth's atmosphere of today? More or less, it means the share of carbon dioxide in the air today from our nations and regions of interest looks like what we've illustrated in the following treemap chart:

This chart shows the largest share for any single nation is that for the United States, to which a little over one-fifth of the CO₂ is attributed. China ranks second by that measure at over 17% and the combined nations of the European Union come in third at 15%. We also find India's 3.9% share outranks the United Kingdom's 3.4%. The "Rest of the World" combines for nearly two-fifth's of the excess fossil-fuel based carbon dioxide emissions present in the atmosphere through 2021.

But these relative shares are not going to stay that way. We also asked "what if each of these nations or regions had the same carbon dioxide output they did in 2021 for the next ten years through 2031?" to see how this last chart might change. We found that in 2031, China will replace the United States as the largest single national contributor of carbon dioxide in the air.

In reality, that outcome will occur before the end of the 2020s. China's carbon dioxide emissions have soared since 2021 so our assumption of level CO₂ emissions for the "what if" scenario we ran does not hold.

References

Friedlingstein et al. Global Carbon Budget 2022, Earth System Science Data, 11 November 2022. DOI: 10.5194/essd-14-4811-2022.

Political Calculations. How Long Does Carbon Dioxide Stay in the Atmosphere? [Online Article, Tool]. 19 July 2023.

Political Calculations. How Much Fossil Fuel CO2 Is in the Air? [Online Article]. 15 August 2023.

The trend for the market capitalization of the U.S. new home market continued to benefit from the "golden handcuffs" problem afflicting the owners of existing homes in August 2023.

That assessment is comes despite the initial estimate of new home sales falling to 54,000 in August 2023 from a revised estimate of 61,000 new homes sold in July 2023. The mean sale price of new homes sold rose to an initial estimate of $514,000 in August 2023, up from July 2023's revised estimate of $507,900.

When we do the market cap math, multipling the mean sale price of new homes by their number of sales, we find the raw market capitalization of the U.S. new home market dropped from $30.98 billion to an initial estimate of $27.76 billion from July to August 2023. However, that dip was not sufficient to break what has been an upward trend for the new home market cap since November 2022.

Taken as the time-shifted, partially complete rolling twelve month average of the raw total value of new home sales, we find August 2023 registered the highest market cap since December 2020, with an initial estimate of $30.28 billion. That figure tops the finalized estimate of $30.12 billion recorded in December 2020. Here is the latest update to our chart illustrating the market capitalization of the U.S. new home market since January 1976:

The next two charts show the latest changes in the trends for new home sales and prices:

New home sales trend still rising:

New home prices slowly trending down:

The trends through December 2022 in these charts are now fully finalized outside of any major revisions the Census Bureau may release at a future date. December 2022 saw the first uptick in the new home market cap, rising to $26.69 billion after having bottomed at $26.45 billion in the preceding month.

We'll review the affordability of new homes sometime next week, which will include the downward revisions in our estimates of median household income from March 2021 through July 2023, in addition to presenting the initial new home affordability estimate for August 2023.

References

U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 26 September 2023. 

U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 26 September 2023. 

Image credit: Photo by Avi Waxman on Unsplash.

We're afraid we have to start this edition of the "less than useful data" series with a dire announcement. Job cut announcements jumped in August 2023 and are up 210% year to date. Let's turn now to Challenger Gray & Christmas for the Challenger Report August 2023 with the details:

U.S.-based employers announced 75,151 cuts in August, a 217% increase from the 23,697 cuts announced one month prior. It is 267% higher than the 20,485 cuts announced in the same month in 2022, according to a report released Thursday from global outplacement and business and executive coaching firm Challenger, Gray & Christmas, Inc.

So far this year, companies have announced plans to cut 557,057 jobs, a 210% increase from the 179,506 cuts announced in the same period last year. It is the highest January-August total since 2020, when 1,963,458 cuts were recorded. It is the third-highest year-to-date total since 2009.

“Job openings are falling, and American workers are more reluctant to leave their positions right now. The job market is resetting after the pandemic and post-pandemic hiring frenzy,” said Andrew Challenger, labor expert and Senior Vice President of Challenger, Gray & Christmas, Inc.

That sounds pretty bad. But we'll need more context to tell if it's really as dire as it sounds. The following chart from Trading Economics shows the last 25 years of Challenger's periodic layoff reports:

We can quickly see the current level of layoffs is being compared with a period in which the the announced layoffs were abnormally low following the Coronavirus Pandemic Recession, which inflates the reported percentages. We also see the level of layoffs in 2023 is the highest since 2009, so that observation is correct. However, we also see they're at about the same level that held through much of the decade of the 2000s, so what exactly is that telling us anything about the state of today's economy? Is this a cause for great concern going forward? Is the job market going back be more like it was in the early part of the 21st century with respect to the pace of announced layoffs? Can any of these questions be answered with the layoff report's data?

That's the rub. Moody's economist Mark Zandi included the Challenger layoff report in a short list of economic indicators he pays less attention to because they can be either misleading or hard to interpret given their signal-to-noise ratio.

Unlike other entries in this series, we think the Challenger layoff data has a lot of value as a lagging economic indicator that confirms whether the economy experienced a period of contraction after the fact. But its value as a forward-looking economic indicator is limited because it often raises more questions than it can answer, which is almost certainly why market forecasters like Zandi don't give Challenger layoff announcements more attention.

So if you're a economic historian, it's useful, but if you're a forward-looking analyst, Challenger layoff announcments are much less so. It all comes down to where your time arrow is pointing.

Previously on Political Calculations

• Less Than Useful Data in the World of Big Data
• Less Than Useful Data: Consumer Confidence
• Less Than Useful Data: FHFA House Price Index
• Less Than Useful Data: Index of Leading Economic Indicators
• Less Than Useful Data: Weekly Chain Store Sales
• Less Than Useful Data: Challenger Layoff Announcements

Image credit: Layoffs image by Gerd Altmann from Pixabay.