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August 31, 2018

Median household income in the United States rose to $62,450 in July 2018, with Sentier Research reporting a 0.4% increase over its June 2018 estimate of $62,175.

The following chart shows the nominal (red) and inflation-adjusted (blue) trends for median household income in the United States from January 2000 through July 2018, as given by Sentier Research's monthly estimates. The inflation-adjusted figures are presented in terms of constant July 2018 U.S. dollars.

Median Household Income in the 21st Century: Nominal and Real Estimates, January 2000 to July 2018

U.S. median household income is setting new monthly records in both nominal and real terms. In July 2018, it is also now seeing some of its fastest-on-record nominal year-over-year growth rates. Our second chart shows that data from January 2001 through July 2018.

Median Household Income in the 21st Century: Year Over Year Growth Rate, January 2001 to July 2018

The nominal rate of year over year growth for median household income has reached 5.6% in July 2018, which ranks fifth for the monthly data we have going back to January 2001. The inflation-adjusted year-over-year growth rate of median household income was also up for July 2018.

Analyst's Notes

Our alternative method for estimating median household income turned in a preliminary figure of $62,152 for July 2018, within 0.5% of Sentier Research's Current Population Survey-based estimate. This figure is up from the $61,891 preliminary figure that we had previously reported for June 2018, which we would revise upward this month to be $61,929. The BEA's monthly revision of its personal income data affected data from January 2018 through June 2018.

Looking forward, September 2018 will be another big month on the U.S. income data calendar, with the U.S. Census Bureau set to publish its annual income figures for the 2017 calendar year, following months of compiling and analyzing all the income data that it collected through the Annual Social and Economic Supplement of its Current Population Survey in March 2018.

Data Sources

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. [PDF Document, Online Database (via Federal Reserve Economic Data)]. Last Updated: 30 August 2018.

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. [PDF Document, Online Database (via Federal Reserve Economic Data)]. Last Updated: 30 August 2018.

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 2018.


Sentier Research. Household Income Trends: January 2000 through May 2017, March 2018 through July 2018. [Excel Spreadsheet with Nominal Median Household Incomes for January 2000 through January 2013 courtesy of Doug Short]. [PDF Document]. Accessed 24 August 2018. [Note: We've converted all data to be in terms of current (nominal) U.S. dollars to develop the analysis presented in this series.]


August 30, 2018

We're going to tell the story of the United States' new home market primarily through pictures today, where our first chart visualizes the median and average sale prices of new homes in the U.S. from January 2000 through the just-reported preliminary data for July 2018.

Median and Average Monthly U.S. New Home Sale Prices, January 2000 through July 2018

There's quite a bit of month-to-month volatility in the sales price data, but what we find is that both median and average new home sale prices peaked in December 2017, where they have run under those record values in the months since.

In our next picture, we're going to present the trailing twelve month average of the median new home sale price data, which will smooth out some of that month-to-month volatility, which we'll plot against the trailing twelve month average of median household income over the period from December 2000 through July 2018.

U.S. Median New Home Sale Prices vs Median Household Income, Annual: 1999 - 2016 | Monthly: December 2000 - July 2018

Visualizing the data this way, we can see that the trailing year average of median new home sale prices has been largely flat since April 2018, even though median household incomes have been rising.

What that tells us is that the median new home sold in the U.S. is becoming relatively more affordable for the typical American household. We can confirm that observation in our next chart, which shows the ratio of the trailing twelve month averages of median new home sale prices and median household income, where we're showing annual data going back to 1967, and monthly data since December 2000.

Ratio of Trailing Twelve Month Averages 
for Median New Home Sale Prices and Median Household Income, Annual: 1967 to 2016 | Monthly: December 2000 to July 2018

The combination of a flat trend for median new home sale prices with a rising trend median household incomes means that the typical new home sold in the U.S. has become slightly more affordable for the typical income-earning American household. We should also recognize that ratio remains at a highly elevated level, where new homes overall are considerably less affordable than have been historically.

The data we've presented represents national level data for the United States. Real estate is all about location, location, location, so regional markets can experience very different trends. As an example, check out the California Association of Realtors' July 2018 housing market update, where we find that median housing prices in the state (covering both existing and new housing units) have been rising, although with falling sales volumes, as shortage conditions continue to play havoc in that state's real estate markets.

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August 29, 2018

For many Americans, the month of September is something to look forward to every year with the return of cooler temperatures and, for millions of Starbucks' (NASDAQ: SBUX) consumers, the return of the coffee retailer's delicious Pumpkin Spice Latte.

Except this year, because Starbucks isn't waiting for cooler temperatures to roll out its most popular seasonal drink.

For fall fans, and coffee connoisseurs, it’s the question of the year: When will Starbucks have Pumpkin Spice Lattes? By way of the Starbucks menu, August 28 must be the first day of autumn, because Pumpkin Spice Latte and Pumpkin Spice Frappuccino are available for the first time in 2018 today....

In the past, the coffee chain has offered the Pumpkin Spice Starbucks menu to select customers in advance of the public release date, and sometimes that sneak preview would come as early as August. But the norm is to pour Pumpkin Spice Lattes around early September, as it was in 2017.

When a retailer moves its sales of a seasonal item earlier and earlier into the year, it almost always is a sign that they don't have any better ideas for growing their sales. Selling a popular seasonal item earlier can provide a year-over-year boost for their same-store sales statistics, but as the selling season grows ever-longer, year-after-year, the marketing strategy breaks down because consumers get burned out on the product because the retailer betrays one of the key things that makes the seasonal item special - its limited availability.

In the case of Starbucks however, we're afraid that the early arrival of the PSL is coming at a time when the retailer's U.S. sales and its stock price are struggling.

MarketWatch: Starbucks (SBUX) Stock Price from 29 August 2017 through 28 August 2018

Which is why the company's leaders would appear to be turning to what is its "top-selling seasonal drink of all time" as a means to improve their fortunes.

This is no mere giddiness for sweater season on Starbucks’ part. Spending on specialty drinks like the annual Pumpkin Spice Latte are one way Starbucks stock hopes to recover from an otherwise downward trends this year. In June, Starbucks executive chairman Howard Schultz announced he was retiring, after stepping down as the company’s chief executive in April 2017. Beyond that bombshell, June was also a chaotic month for Starbucks, with the chain announcing it would close 150 locations as it quietly raised coffee prices, the third increase in three years.

We're afraid that count on the number of price increases at Starbucks is incorrect - 2018 marks the sixth price increase in the last four years at the company, where the current series of price rises began in July 2014 in response to high coffee and milk prices, then continued in July 2015, and again in July 2016, before breaking the annual pattern to raise prices again in November 2016, then again in September 2017, before waiting until June 2018 to raise them once more.

Speaking of coffee and milk prices, the two main ingredients other that water and spices that go into a Pumpkin Spice Latte, both have fallen considerably since 2014....

Coffee PricesMilk Prices

The combination of lower commodity prices for the company's main product ingredients and higher prices however have only succeeded in sustaining Starbucks' profit margins, where aside from some anomalous rogue quarters, Starbucks' profit margin has consistently ranged between 11% and 14% since 2012.

Which is to say that other factors, such as rising labor and employee benefit costs, higher real estate costs, and the need to generate revenue to fund the company's overseas expansion, particularly in China, are largely responsible for Starbucks' current business predicament and flat profit performance.

So long as that continues, we can probably expect an earlier and earlier arrival time for Starbucks' Pumpkin Spice Latte. Only time will tell if the PSL "season" will become as stretched as the one for Christmas, which once used to begin on the day after Thanksgiving, but which now may be measured to begin from some retailers begin putting up their annual Christmas displays right after the Fourth of July holiday....

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August 28, 2018

On Monday, 27 August 2018, the S&P 500 (Index: SPX) close at a new record high value of 2,896.74. At the same time, it also broke its previous record for total market capitalization, bursting through the estimated $24.52 trillion mark that it had previously set back on 26 January 2018 to reach a brand new estimated height of $24.55 trillion!

That's something that didn't happen last Friday, 24 August 2018, when the S&P 500 only broke through its previous record high closing value of 2,874.69 to surpass its previous record closing value of 2,872.87, which had been recorded nearly seven months earlier back on 26 January 2018.

So how is that possible? After all, a new record high value for the S&P 500 should mean that its total market capitalization, the combined value of all the shares of the component company stocks that make up the index, are also setting new record high values, right? So why did the S&P 500 only break one record for market value on Friday, 24 August 2018 and not two records, like it did on 27 August 2018 for both the index' value and its market cap?

To help better see where the S&P 500 ended up short on the market cap measure, even though it had broken its previous record high index value, we've put together the following chart revealing our estimates of the daily value of the S&P 500's total market cap from the end of 2017-Q4 through Monday, 27 August 2018.

S&P 500 Estimated Total Market Capitalization, 29 December 2017 through 24 August 2018

Here, we see that the S&P 500's estimated market cap previously peaked at $24.52 trillion on 26 January 2018. On 24 August 2018, the same day that the S&P 500 index value first surpassed its 26 January 2018 closing high value, we find that the S&P 500's estimated market cap stood at $24.36 trillion.

The reason for that outcome turns out to be mathematically simple. Here, because the index' total market capitalization is the product of its index value and the S&P 500 divisor, which can be thought of as being the equivalent to the number of shares that investors would collectively hold in the S&P 500 if it were a single publicly-traded corporate entity like Apple (Nasdaq: AAPL) or ExxonMobil (NYSE: XOM), the only way the S&P 500's market cap could be less on 24 August 2018 than it was on 26 January 2018, despite the value of the index now being higher, is if the value of the S&P 500 divisor had declined during the intervening months. When we check that data, we find out that's exactly what has happened.

There are multiple contributors to that outcome. When a component company of the S&P 500 does things like execute a merger, or spin off business units into new publicly-traded companies, or split their stock, or conduct a reverse-split, or buys back their shares, or issues new ones, or when an old company is removed from the index to make way for a new company being added to it, these kinds of factors will change the overall number of outstanding shares in the market. Standard and Poor has proprietary methods for keeping track of this action, but the level they come up with for the S&P 500 divisor reflects the overall net changes that they track for all the companies whose shares of stock compose the index.

In this case, we suspect that the underlying story is one that involves share buybacks, which have been occurring pretty steadily since the S&P 500 divisor last peaked on 31 December 2013. Which itself was a brief blip following a much larger downward trend that began back in 2004, when the S&P 500 divisor reached its all-time record value.

Data Sources

Silverblatt, Howard. Standard & Poor. S&P 500 Earnings and Estimates. [Excel Spreadsheet]. 14 August 2018.

Yahoo! Finance. S&P 500 Historic Values. [Online Database]. Accessed 27 August 2018.

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August 27, 2018

It took 147 trading days to do it, but on Friday, 24 August 2018, the closing value of the S&P 500 (Index: SPX) reached 2,874.69, finally surpassing its previous record high closing value of 2,872.87 that it set back on Friday, 26 January 2018!

At the same time, the fourth week of August 2018 also saw the S&P 500 apparently set a new record for bull market duration, where some analysts are measuring the length of the market's current bull run from its closing low value of of 676.53 on 9 March 2009, which marked the bottom of the market's Great Recession-era decline.

Then again, that particular record depends on how you might define a bull run, where there's a great debate about that topic between Nir Kaissar and Barry Ritholtz over at Bloomberg, where they reveal that there's more than one valid way to keep score in the record books!

That kind of argument even carries over to the seemingly incontrovertible new high closing value set by the S&P 500! While we acknowledge the new record high in its nominal value as being worthy of note, we can make the argument that the portion of the stock market represented by the S&P 500 still has yet to reach a true new high even in nominal terms, which is something that we'll explore in the very near future!

Until then, we find that the current trajectory of the S&P 500 is still falling well within the range that we projected that it would be likely to several weeks ago, where we've just passed the midpoint of our five-week long redzone forecast.

Alternative Futures - S&P 500 - 2018Q3 - Standard Model with Redzone Forecast for 2019Q1 Focus between 20180808 and 20180911 - Snapshot on 17 Aug 2018

The market moving news of the week continued to be slow, until the final day of Week 4 of August 2018, when Federal Reserve Chair Jay Powell's comments gave markets the boost they needed for the S&P 500 to reach a new record closing value.

Monday, 20 August 2018
Tuesday, 21 August 2018
Wednesday, 22 August 2018
Thursday, 23 August 2018
Friday, 24 August 2018

Elsewhere, Barry Ritholtz broke down the bigger picture of economy's and the market's news of the week into an equal number of positives and negatives.

Update: Corrected the dates for the news headlines. Must fix programming glitch!...

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August 24, 2018

It's a little known fact, but spaghetti has been mystifying physicists for decades.

The reason why has to do with a puzzle about why the long, cylindrical dried pasta breaks the way it does when it is held at the ends and bent, where instead of breaking into two pieces at the point where the bend is greatest, the way that most solid, brittle materials of similar proportions will fracture, a strand of spaghetti will break into three or more pieces instead.

Dustin at Smarter Every Day explains why the spaghetti-breaking conundrum is a really big deal in a 7 minute-long video:

There's nothing like watching dry spaghetti break at a quarter-million frames per second!

The reason why we're covering this topic today is because a group of mathematicians and mechanical engineers have teamed up to not only solve the puzzle of why dry spaghetti fractures the way that it does, but also how to manipulate spaghetti strands to break into just two pieces. The researchers, Ronald H. Heisser, Vishal P. Patil, Norbert Stoop, Emmanuel Villermaux, and Jörn Dunkel, explain why what might otherwise seem to be trivial work into the fracture dynamics of dry spaghetti noodles is significant in their recently published paper.

Fracture processes are ubiquitous in nature, from earthquakes to broken trees and bones. Understanding and controlling fracture dynamics remain one of the foremost theoretical and practical challenges in material science and physics. A well-known problem with direct implications for the fracture behavior of elongated brittle objects, such as vaulting poles or long fibers, goes back to the famous physicist Richard Feynman who observed that dry spaghetti almost always breaks into three or more pieces when exposed to large bending stresses. While bending-induced fracture is fairly well understood nowadays, much less is known about the effects of twist. Our experimental and theoretical results demonstrate that twisting enables remarkable fracture control by using the different propagation speeds of twist and bending waves.

MIT's press release announcing the publication of the researchers' paper in the Proceedings of the National Academy of Sciences reveals how mathematical analysis was able to accurately describe both how spaghetti breaks into three or more pieces under ordinary bending conditions, and how it might be additionally manipulated so that it would only break into two pieces:

Patil began to develop a mathematical model to explain how twisting can snap a stick in two. To do this, he generalized previous work by the French scientists Basile Audoly and Sebastien Neukirch, who developed the original theory to describe the “snap-back effect,” in which a secondary wave caused by a stick’s initial break creates additional fractures, causing spaghetti to mostly snap in three or more fragments.

Patil adapted this theory by adding the element of twisting, and looked at how twist should affect any forces and waves propagating through a stick as it is bent. From his model, he found that, if a 10-inch-long spaghetti stick is first twisted by about 270 degrees and then bent, it will snap in two, mainly due to two effects. The snap-back, in which the stick will spring back in the opposite direction from which it was bent, is weakened in the presence of twist. And, the twist-back, where the stick will essentially unwind to its original straightened configuration, releases energy from the rod, preventing additional fractures.

“Once it breaks, you still have a snap-back because the rod wants to be straight,” Dunkel explains. “But it also doesn’t want to be twisted.”

Just as the snap-back will create a bending wave, in which the stick will wobble back and forth, the unwinding generates a “twist wave,” where the stick essentially corkscrews back and forth until it comes to rest. The twist wave travels faster than the bending wave, dissipating energy so that additional critical stress accumulations, which might cause subsequent fractures, do not occur.

“That’s why you never get this second break when you twist hard enough,” Dunkel says.

The authors confirmed the analytical predictions with experimental data, where they constructed a rig to both twist and bend spaghetti strands to put the mathematical theory to the test.

And because they did, we now have a much better understanding of the structural mechanics of a material that we previously did not have, which opens the door to using materials with similar properties in real-world structural applications.

Or for that matter, to improve the structural performance of the next generation of spaghetti bridges!

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August 23, 2018

Every now and again in the course of the projects we develop, we come across data that is, in and of itself, pretty interesting. Today, it provides an opportunity to visualize the U.S. government's revenues from the excise taxes it imposes on alcohol-based beverages. The following chart visualizes the rolling four-quarter total of U.S. federal alcohol taxes in the 21st century, covering each quarter from the end of 2000 through the recently ended quarter in June 2018.

Rolling Four-Quarter Total of U.S. Federal Alcohol Excise Tax Collections, Quarters Ending December 2000 - June 2018

We've opted to show the rolling four quarter total of all federal excise taxes on alcohol-based beverages as a way to annualize the data, which allows us to account for the annual seasonality in the quarterly reported data. In our next chart, we've calculated the annualized amount of federal alcohol taxes per adult, based on our estimate of the Age 21 and older resident population of the United States, for the period from December 2000 through June 2018.

Annualized U.S. Federal Alcohol Excise Tax Collections per Adult (Est. Age 21+ Population), Quarters Ending December 2000 - June 2018

Some quick observations:

  • The excise tax rates that the U.S. government has imposed on alcohol-based beverages have been stable through this point of the 21st Century.
  • At the same time, the U.S. government imposes different excise tax rates on different types of alcohol-based beverages.
  • Our chart showing the amount of alcohol taxes per American legal drinking-age adult shows a generally increasing trend from 2000 through 2018. This trend may be the result of Americans consuming an increasing amount of alcohol, Americans shifting their alcohol consumption to favor beverages that are taxed at higher rates, and quite possibly, both.
  • Looking at our chart showing the rolling four quarter total of U.S. alcohol tax revenues, recessions would appear to have a relatively negative effect on the alcohol consumption patterns of Americans, where they dial back their consumption when times are tight.
  • But there's a much bigger, as yet unexplained effect in periodically reducing that consumption, which is evident in the quarters from December 2012 through June 2014, and later from June 2015 through March 2016, both of which fall outside the National Bureau of Economic Research's official recession dates.

We say "unexplained", because as yet, we don't know what's behind those dips. And because we don't, we may have found a new project to develop.

In the meantime, if you want to find out more about U.S. Drunk Tax History, check out TaxNotes' podcast on the topic!


U.S. Alcohol and Tobacco Tax and Trade Bureau. Tax Collections. [Online Documents]. Accessed 18 August 2018.

U.S. Internal Revenue Service. Federal Excise Taxes or Fees Reported to or Collected by the Internal Revenue Service, Alcohol and Tobacco Tax and Trade Bureau, and Customs Service. 1999-2016. [Excel Spreadsheet]. Accessed 18 August 2018.

U.S. Census Bureau, Population Division. Monthly Population Estimates for the United States: January 1, 1959 to June 1, 2018. [Online Database]. Accessed 18 August 2018.

U.S. Census Bureau, Population Division. Intercensal Estimates of the Resident Population by Single Year of Age and Sex for States and the United States: April 1, 2000 to July 1, 2010. [CSV Data]. 12 December 2016. Accessed 18 August 2018.

U.S. Census Bureau, Population Division. Annual Estimates of the Resident Population by Sex, Single Year of Age, Race, and Hispanic Origin for the United States: April 1, 2010 to July 1, 2017. [Online Database]. 12 June 2018. Accessed 18 August 2018.

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August 22, 2018

First the good news, as reported in the Boston Globe: Now hiring: teenagers (and anyone else willing to work).

After years of falling employment rates, the share of teens with jobs has been rising in a historically tight labor market where the number of job openings exceeded the number of job seekers for the first time on record this year. From May to July this year, hiring of 16-to-19-year-olds increased nearly 8 percent nationwide over last summer — the highest number of teen jobs added since 2012, according to the outplacement firm Challenger, Gray & Christmas.

The details provided by Challenger, Gray & Christmas on the 2018's teen hiring boom look even better.

Teen hiring in July rose 62 percent from the 190,000 jobs added in the same month last year, as 307,000 workers aged 16 to 19 found employment, according to analysis of non-seasonally adjusted data from the Bureau of Labor Statistics by global outplacement and executive coaching firm Challenger, Gray & Christmas, Inc.

This summer saw 1,388,000 jobs gained by teens, 7.8 percent higher than the 1,288,000 jobs gained by teenagers last summer. It is the highest number of teen jobs gained since 2012, when 1,397,000 jobs were added.

“Some retailers announced they were beginning to hire for the holiday season early, a boon to teen workers who want employment,” said Andrew Challenger, Vice President of Challenger, Gray & Christmas, Inc.

We've been tracking the teen employment situation in California for years, so after coming across this headlines, we were looking forward to seeing how the job market for one out of every eight teenagers in the U.S. was doing, especially since the state just reported its employment data for July 2018.

Unfortunately, the teen job scene in California is continuing to show signs of struggling, even though nationally, the news indicates that teens seeking jobs are increasingly getting hired.

California Teen (Age 16-19) Labor Force and Total Employed Trailing Twelve Month Average, January 2004 - July 2018

As you can see from the data published by California's Employment Development Division, both the size of California's teen labor force and the number of employed teens in the state has declined since the beginning of 2018, continuing a long term trend after a minor rebound at the beginning of the year.

Those falling numbers however are in part attributable to a significant decline in California's population of 16 to 19 year olds, much of which appears to have taken place since mid-2017. To account for the effects of that population decline, we've calculated the percentage of the teen labor force and the teen employment ranks as a percentage of California's teen population, which we've presented in the next chart.

California Teen (Age 16-19) Labor Force and Total Employed as Percentage of Age 16-19 Population, January 2004 - July 2018

Here, we see that after accounting for the falling size of the state's teen population, the percentage of teens participating in California's labor force has been falling since the beginning of 2018. That trend suggests a continuing weakness in California's job market for teens.

In looking at the trend in the percentage of Californian teens with jobs, we find that after having bottomed in early 2017 and rebounding through the end of that year, the trend in the growth of California's employed teens has decelerated in 2018, where we would characterize the employment data through July 2018 as either only very slightly rising or running flat when compared with 2017.

What California's teen employment situation data indicates is that the increase in teen jobs reported by Challenger, Gray and Christmas for the 2018 summer hiring season is not being universally shared across the U.S. teen population, where California's teen job market would appear to be lagging behind. In California, less than 23% of the state's trailing year population of 16 to 19 year olds was counted as employed in July 2018. In the rest of the United States, the figure is over 31%.

That's the glass-half-empty interpretation of the data. The glass-half-full interpretation is that a flat or very slowly rising share of employed teens is not the falling trend that we might expect when the teen labor force-to-population percentage has been falling. That combination suggests that the teen employment situation in California is stronger that it would at first appear.

The real question is how long might the declining participation of teens in California's labor force continue? At some point, if the teen job market is genuinely improving, we should be seeing the percentage of the teen population in the labor force rise as employers do more to incent teens to come work for them, where more teens would respond to those incentives and the improved prospects of getting a job by joining the labor force.

For that to happen, California's teen employers will have to have an improving business outlook, where the amount of revenues they expect to make can justify the cost of hiring and training the least-educated, least-experienced, and least-skilled members of California's work force: teenagers.

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August 21, 2018

We've drilled down a bit deeper into the U.S. Census Bureau's data documenting the lifetime income trajectories that Americans have expect based on their level of education.

Previously, we looked just at those trajectories for all Americans with some work experience for the years from 2000 through 2016, which includes the data for Americans who work part time, who may only work part of a year, who may have exited the workforce, whether temporarily, such as to focus on raising children or because of layoffs or other job changes, or permanently, such as through retirement.

Now, we're focusing like a laser beam on Americans who work full-time, year-round and, as a bonus, we've expanded the data in our analysis to include all the years for which the Census Bureau has provided this information in a convenient digital format, which is to say since 1994. Our first chart shows the mean lifetime income trajectories for various levels of educational attainment for these full-time, year-round workers:

Mean Lifetime Income Trajectories by Education Level for Full-Time, Year-Round Workers as a Percentage of the Age 18-24 Cohort's Mean Income, 1994-2016

This chart reveals a clear difference in the education level-based lifetime income trajectories that Americans who work full-time, all year-round, where those who can sustain working at this pace can expect to have, on average, higher lifetime incomes with higher levels of educational attainment.

That income differentiation also carries from the very outset of their adult working lives, where incomes rise with higher levels of education. The following chart shows this data for 2016, which until September 2018 when the data for 2017 will be made public, represents the most recent year for which this data is available.

Mean Income for Age 18-24 Cohort Working Full-Time, Year-Round by Education Level, 2016

The pattern shown in the first chart is persistent from year-to-year in the Census Bureau's historical data, which provides confidence that the survey data is capturing the average lifetime income trajectories of Americans who work full-time, year-round. As an example of this persistence, the following chart shows the age-based incomes as a percentage of the mean income of the Age 18-24 cohort for Bachelor degree holders who work full-time, year-round.

Lifetime Income Trajectories for Bachelor Degree Holders Working Full-Time, Year-Round, as Percent of Mean Income of Age 18-24 Cohort, 1994-2016

While there is considerable variation from year to year, the overall pattern for lifetime income trajectories holds across the various levels of educational attainment and over what is now more than two decades worth of income data.


U.S. Census Bureau. Current Population Survey Tables for Personal Income. PINC-04. Educational Attainment--People 18 Years Old and Over, by Total Money Earnings, Work Experience, Age, Race, Hispanic Origin, and Sex. Both Sexes, All Races. Worked Full Time, Year Round. [Digital files: 1994, 1995, 1996, 1997, 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016]. Accessed 19 August 2018.

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August 20, 2018

The doldrums of summer are here, which perhaps explains why investor reaction to geopolitical news would seem to be the only thing really moving the needle for the S&P 500 in the third week of August 2018.

After last week's concerns over the risk of contagion from Turkey's economic dilemmas began to be offset by a double dose of good news in the form of improved prospects for U.S.-China and U.S.-Mexico trade negotiations. But what really seems to have moved the needle during Week 3 of August 2018 was the solid earnings results that came out from both Walmart (NYSE: WMT) and Cisco (NASDAQ: CSCO) on Thursday, 16 August 2018.

Alternative Futures - S&P 500 - 2018Q3 - Standard Model with Redzone Forecast for 2019Q1 Focus between 20180808 and 20180911 - Snapshot on 17 Aug 2018

That said, this being the doldrums of summer, there wasn't a whole lot of major market-moving news in the week that was.

Monday, 13 August 2018
Tuesday, 14 August 2018
Wednesday, 15 August 2018
Thursday, 16 August 2018
Friday, 17 August 2018

For the second week in a row, Barry Ritholtz identified more negatives than positives in the week's economics and markets news.

The good news is that the S&P 500 is continuing to track along with our redzone forecast, where in a week where there really wasn't much going on, stock prices behaved as expected.

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August 17, 2018

There are certain things that are understood without having to be said, because they're very obvious. Things like "never get involved in a land war in Asia" or "never go against a Sicilian when death is on the line" are examples of these kinds of things. Other examples can be found in the kinds of things that Captain Obvious might say, such as "the sky is blue" or "Philadelphians sure drink a lot of alcohol".

But what drives Philadelphians to drink so much alcohol?

The short answer is that outside of prohibition, Philadelphians have always consumed large quantities of alcohol. And as many Philadelphians might point out, prohibition wasn't much of an obstacle for the city's dedicated alcohol consumers.

When it comes to alcohol consumption then, the city of Philadelphia is starting out with a strong base. So what might prompt already heavy-drinking Philadelphians to boost their alcohol consumption to even higher levels?

Believe it or not, the city's controversial tax on soft drinks would appear to be behind the city's recent surge in alcohol sales. Last August, Scott Drenkard and Courtney Shupert of the nonpartisan Tax Foundation found that Philadelphia's "high tax rate on nonalcoholic beverages makes them more expensive than beer in some cases", which they believed was "likely to drive consumers to more alcoholic beverage consumption".

Philadelphia's monthly liquor tax collections confirm that this outcome has come to pass, where the revenues from the city's 10% tax on alcoholic beverage sales is documented within its tax reports for School District revenue collections. The following chart, which covers the City of Philadelphia's last five fiscal years, reveals that in the 18 months since the implementation of the city's controversial tax on all naturally and artificially-sweetened beverages distributed for retail sale within the city went into effect, the city's has been collecting an average of $6.5 million per month from its alcohol taxes, up from the average of $5.5 million per month it collected in the 18 months preceding the soda tax implementation, an increase of $1 million per month on average.

Philadelphia Liquor Tax Collections by Month, July 2013 to June 2018

The same phenomenon is not evident on the opposite side of Pennsylvania, where Allegheny County's revenues from its 7% tax on alcoholic beverage sales indicate no meaningful difference in the level of alcohol sales in that region of the same state over the same period of time (the data for June 2018 is preliminary).

Philadelphia Liquor Tax Collections by Month, July 2013 to June 2018

The two observations together are important because Allegheny County, being in the same state as Philadelphia and thereby subject to all of the same state laws and regulations on the sale of alcohol, represents the control in what amounts to a natural experiment for measuring the effect of Philadelphia's soda tax upon liquor sales.

And what a difference it appears to be. Doing the math to work out the corresponding level of liquor sales, Philadelphia's residents would appear to have increased their average monthly consumption of alcoholic beverages from an average of $55 million to $65 million, an increase of $10 million in the sales of taxed alcoholic beverages per month.

Tax Foundation (Ben Rickards): 4 Janauary 2017 Sale Price of 12-Pack of 12-Oz Bottles of Icehouse Beer

Let's put that figure into a more fun context! In January 2017, just after Philadelphia's soda tax went into effect, the Tax Foundation documented that the sale price of a 12-pack of Icehouse beer, which had just become cheaper than a 12-pack of non-alcoholic Propel sports drinks, was $7.99 in Philadelphia. For the sake of argument, let's say that after Philadelphia's soda tax went into effect, Philadelphia's residents began exclusively consuming $10 million worth of Icehouse beer per month at this price. How many extra bottles of beer per month is that?

Dividing the average increase of $10 million per month by $7.99 for the 12-pack of Icehouse beer, we find that corresponds to the equivalent of roughly 1.25 million 12-packs per month, which works out to be about 15 million extra 12-oz bottles of beer consumed in the city. Per month.

Philadelphia's total population in July 2017 was estimated to be 1.581 million people. So, after the City of Philadelphia imposed its sweetened beverage tax in January 2017, every man, woman and child living in the city responded by increasing their consumption of Icehouse beer by 9.5 bottles per month. Multiplied by 12 months, that's an increase of 114 bottles per year.

Of course, that's a ridiculous number, because Pennsylvania prohibits the sale of alcoholic beverages to individuals under the age of 21. That prohibition blocks some 26% of the city's population from even being able to buy Icehouse beer, assuming that the law is actively enforced against Philadelphia residents under that age. If we do the back-of-the-envelope math to estimate how many extra equivalent 12-fluid-ounce bottles of Icehouse beer that Philadelphia's adult population is consuming, we come up with a monthly increase of 12.9 bottles per legal drinking-age Philadelphian, or over 154 bottles of Icehouse beer per adult in the city per year.

Icehouse Beer - Source: Utah Alcohol Control Board - https://abc.utah.gov/about/documents/81st_annual.pdf

If we convert 12-fluid-ounce bottles of Icehouse beer into the equivalent number of calories, we find that at 149 calories per 12-fluid ounce container, Philadelphia's adults are drinking in an additional 1,916 calories per month, or just over 22,989 calories per year.

Since a 12-ounce bottle of Coca-Cola has 140 calories, that's a nearly one-for-one swap where calories are concerned, so there's no realized health benefit from calorie reduction for the portion of Philadelphia's adult population who have changed out sugary soft drinks for beer. For consumers who switched from low-to-no calorie soft drinks to beer, their calorie consumption would have substantially increased.

That of course doesn't consider the impact of other potential health and safety issues that city health officials believe would go along with the increased alcohol consumption in Philadelphia that would appear to have come about as a direct consequence of the city's controversial soda tax.

No matter what, one solid fact holds true. Philadelphians sure drink a lot of alcohol, and since the city's soda tax went into effect, they are sure drinking a lot more!

Update 8:34 PM EDT: Here's a chart showing the overall trend for the trailing 12-month total for Philadelphia's liquor tax collections from July 2014 through June 2018.

Trailing 12 Month Philadelphia Liquor Tax Collections, July 2014 to June 2018

You can see Philadelphia's liquor tax collections accelerate from their previous growth rate beginning in January 2017 through December 2017. The peak values in the chart occur in January and February 2018 which, if you think about what was going on in Philadelphia in those specific months, have their own special contributing factor to boosting alcohol consumption in the city! Since then, Philadelphia's liquor tax collections have largely leveled out at an elevated level with respect to the trend that existed before Philadelphia's soda tax went into effect.

In the 18 months from January 2017 through June 2018, the trailing year total of Philadelphia's liquor tax collections increased by 13.4% of its December 2016 value, thanks to Philadelphia's increase in alcohol consumption. By comparison, the trailing year total of U.S. federal alcohol tax collections rose by just 0.5% over the same period. Since the city implemented its controversial soda tax, Philadelphians have increased their alcohol consumption by a much larger amount than the rest of America!

Previously on Political Calculations

We've been covering the story of Philadelphia's flawed soda tax on roughly a monthly basis from almost the very beginning, where our coverage began as something of a natural extension from one of the stories we featured as part of our Examples of Junk Science Series. The linked list below will take you through all our in-near-real-time analysis of the impact of the tax, which at this writing, has still to reach its end.

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August 16, 2018

Every three months, we take a snapshot of the expectations for future earnings in the S&P 500 at approximately the midpoint of the current quarter, shortly after most U.S. firms have announced their previous quarter's earnings.

This time round, we find that the projected future for S&P 500 earnings has softened through the end of 2018, but has strengthened through the end of 2019.

Forecasts for S&P 500 Trailing Twelve Month Earnings per Share, 2014-2020, Snapshot on 10 August 2018

Compared to the previous quarter, a mixed picture.

Perhaps the biggest contributor to that downward adjustment in the near term expected future for earnings was Facebook (Nasdaq: FB), which TheStreet described as a "complete outlier" after they reported their earnings and outlook at the end of July 2018.

Earnings blowouts from Caterpillar (CAT - Get Report) and Amazon (AMZN - Get Report) look like the norm this earnings season, not the Facebook (FB - Get Report) earnings call meltdown.

"The tone on earnings calls remains positive - mentions of "better" or "stronger" relative to "worse" or weaker" is still above-average (despite being down from the last few quarters' highs), and mentions of optimism are also above average (and up from last quarter)," says Bank of America Merrill Lynch strategists.

Facebook's "Black Thursday" was in large part fueled by an earnings call littered with concerns about future growth rates.

We'll see how things change three months from now, with the fourth quarter of each year being historically the most popular period for when companies announce any significant changes in their future business outlook.

Data Source

Silverblatt, Howard. Standard & Poor. S&P 500 Earnings and Estimates. [Excel Spreadsheet]. 14 August 2018.

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August 15, 2018

How will your annual income change over your life?

That's a difficult, if not impossible, question to answer for an individual, considering that it depends upon specific details like your education, your experience, whether you work, how often you might change jobs, experience a layoff, get promoted, when you retire, et cetera. Statistically however, we can get a pretty good idea from income data collected by the U.S. Census Bureau.

We recently completed a project where we looked at income data for the total population for every year from 2000 through 2016, where we found a pretty unique pattern hidden within each year's data - the average income for the reported age groups follows a fairly predictable and stable trajectory from year to year.

In the following chart, we've graphed four curves, where each curve corresponds to a different level of educational attainment. To generate each trajectory, for each level of education in each year, we first converted the average incomes listed for each age group into a percentage of the average income reported for the Age 18-24 cohort. We then calculated the average percentage income for each age group over all the years from 2000 through 2016.

Lifetime Average Income Trajectories as Percent of Average Mean Income for Age 18-24 Cohort, by Educational Attainment, Based on Income Data from 2000 through 2016

For each data point, the "Reference Age" in the horizontal axis represents the middle of the age cohort for which the income data was reported, which for Age 18-24 is 21, for Age 25-29 is 27, and so on....

Right away, you can see the similarities between the income trajectories by age, which all fall within a relatively narrow range of one another. And that's despite the great differences between the average incomes reported for each education level for the Age 18-24 cohort, which we've indicated for 2016 in the inset in the chart above.

What kind of difference does that base average income set by education level have on a the average American's lifetime income trajectory and earnings?

In the next chart, we do the math, pairing the 2016 average income of the Age 18-24 group with the average income trajectories for all years from 2000 through 2016.

Lifetime Average Income Trajectories by Educational Attainment, Based on Income Data from 2000 through 2016, with 2016 Age 18-24 Base Incomes

The curves for each education level don't match the actual income trajectories of each for 2016, but they're not all that far off either.

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August 14, 2018

The third quarter of 2018 is nearly half over, which makes it a good time to see how the number of dividend cuts that have been announced over the previous six weeks compare with the same points of time in the third quarter of 2017 and also the previous two quarters of 2018!

Let's start with the year-over-year comparison of the third quarters of 2017 and 2018 from our two near-real time sources for these dividend declarations.

Cumulative Announced Dividend Cuts in U.S. by Day of Quarter in 2018, Snapshot 2018-06-27

Compared to 2017-Q3, the pace of dividend cuts announced so far in the current quarter of 2018-Q3 is running well behind, which represents an improved situation for publicly traded companies in the U.S.

Likewise, when we compare 2018-Q3 against both 2018-Q1 and 2018-Q2, we find that dividend cut announcements in the third quarter of 2018 is so far keeping pace with what was recorded during the first quarter, but is slower than what we saw during the second quarter. Again, that's good news.

Cumulative Announced Dividend Cuts in U.S. by Day of Quarter, 2018-Q2 vs 2017-Q2, Snapshot 2018-06-27

Through Friday, 10 August 2018, we've recorded the following 17 dividend cut announcements for 2018-Q3.

Tallying up the 2018-Q3 list of dividend cuts to date, over half are firms (9) in the oil and gas industries, six are financial firms or Real Estate Investment Trusts (REITs), one (R.R. Donnelley & Sons) is a provider of business services and one last one (Pentair) may not really count as a true dividend cut, where the company recently span off its electrical products division into a new dividend-paying company called nVent Electric (NYSE: NVT).

[We haven't confirmed that the combined dividend paid out by both companies equals or exceeds Pentair's previous dividend payout, which is why we're still including the dividend cut announcement for Pentair in our tally of dividend cuts.]

All in all, the relative absence of dividend cut announcements is a positive indication for stock market investors.

Data Sources

Our near-real time sampling of dividend cut announcements is obtained from the following two sources. While we seek to capture 100% of such announcements, they often represent just a fraction of the total announcements for the U.S. stock market, which we report on in our Dividends by the Numbers series!

Seeking Alpha Market Currents. Filtered for Dividends. [Online Database]. Accessed 10 August 2018.

Wall Street Journal. Dividend Declarations. [Online Database]. Accessed 10 August 2018.


About Political Calculations

Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:

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