Economic Indicators Defined & Methodology

Explanation

Where the data is located: Consult the table below for a description of the economic indicator, the data presented, and an electronic link to the data.  An explanation for how the graphs are constructed is below this table.
Indicator What is graphed Why is this important Source Link Data print Data description
Gross Domestic Product Annual change in the GDP The gross domestic product (GDP) is the sum total of all goods and services produced by labor and property in the US.
  • It is the single measure that captures trends in the national economy.
  • The Commerce Department measures growth in the US economy by the change in the inflation-adjusted GDP.
  • Recessions are typically defined as 6 months of declining GDP.
  • The GDP is the same as and was formerly called the gross national product, or GNP.
Read More
Bureau of Economic Analysis, Current-dollar and “real” GDP (Excel) http://www.bea.gov/national/ Download PDF GDP (billions)
Disposable Personal Income Annual change in personal disposable income Disposable personal income is the personal income remaining after personal income taxes have been paid.
  • Disposable personal income provides a way to measure whether government policies (such as by increasing or decreasing federal taxes, spending, or the money supply) have led to an increase in personal income.
  • Disposable personal income is the largest component of GDP, accounting for 74% of GDP in 2012.
  • Personal savings equals the amount remaining after personal expenditures have been subtracted; in 2012, 4.2% of disposable personal income was saved in the US.
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Bureau of Economic Analysis http://www.bea.gov/scb/pdf/2012/08%20August/0812%20gdp-other%20nipa_series.pdf Download PDF Total personal disposable income in current dollars (billions)
US Stocks Annual total return of large US stocks Large US stocks include 500 of the largest US stocks in terms of stock market value (90 before 1957).
Total return equals the capital appreciation plus dividends. The stock market is a measure of investment performance and company performance.
Read More
Ibbotson Stocks Bonds Bills and Inflation SBBI Yearbook, Table A-1 Compound Annual Return 1929-2011, available at public libraries;
for the current year, S&P 500 year-to-date return + the dividend yield.
Read More
Download PDF Total return: Annual index fair market value increase (decrease) + dividends
US Government Bonds Annual total return of US government long term bonds Long term US government bonds include bonds with an average maturity of 20-years.
  • Long term bonds gain value when interest rates are dropping and, conversely, lose value when interest rates are rising.
  • When comparing long term bond performance, much of the return can be explained by the rise or fall in interest rates.
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Ibbotson 2012 SBBI, Table A-6 Compound Annual Return, available at public libraries; for 2012:Vanguard Long Term Gov’t Bond (VGLT) year-to-date return. Download PDF Total return: Annual index fair market value increase (decrease) + interest
Long Term Corporate Bonds Annual total return of US corporate long term bonds Long term corporate bonds are high quality US corporate bonds rated Aaa and Aa with a 20-year
maturity. Their return depends on prevailing interest rates and, to a lesser extent, upon the credit quality of the companies the owe the bonds.
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Ibbotson 2012 Stocks Bonds Bills and Inflation SBBI Yearbook Table A-5 compound annual return, available at public libraries; for the current year, Vanguard LT Corp Bond Index (VCLT) year to date return. Download PDF Total return: Annual index fair market value increase (decrease) + interest
Money Supply Annual growth in M2 money supply – cash, checking & savings accounts, CDs The M2 money supply is the sum of all currency, cash, checking accounts (aka demand deposits), savings accounts and CDs (certificates of deposit).
  • The money supply measures how much cash is circulating in in the economy.
  • Monetarists believe that the supply of money should drive the economy, and that it’s best if money supply is stable and increases at a steady rate.
  • By contrast, fiscal (or Keynesian) policy adherents believe that government tax and spending policies can stimulate the economy in times of recession or cool it down in inflationary times.
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Federal Reserve Bank M2 money supply in December each year, seasonally adjusted, Series H6/H6_M2/M2.M, 1959-present.
  • For 1929-1958, see A Monetary History of the US, 1867-1960, Friedman M. & Schwartz A. J., 1963, National Bureau of Economics Research, pp. 712-722, col. 9.
  • See Note 2 below for a description of the adjustment that was made to the 1958 to 1959 increase in the money supply to normalize the 1929-1958 data collected by Friedman and Schwartz, and the data reported by the Federal Reserve Bank beginning in 1959.
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http://www.federalreserve.gov/ datadownload/Format.aspx?rel=H6&series=67c512c9f4eb51a20a5b6da52135b09b&lastObs=&from=&to=&filetype=csv&label=include&layout=seriescolumn&type=package Download PDF Annual change in the seasonally adjusted December M-2 money supply – cash, checking & savings accounts, & CDs (see Note 2)
Unemployment 12-month average unemployment rate The unemployment rate measures the percentage of civilian workers who are actively looking but unable to find work, compiled by the US and state Labor Departments.
  • The unemployment rate gives the clearest indication of the direction of the US economy.
  • The Federal Reserve Bank is charged with keeping both unemployment and inflation low, and these dual goals can conflict.
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US Dep’t of Labor Bureau of Labor statistics http://data.bls.gov/ timeseries/LNS14000000 Download PDF 12-month average unemployment rate (see Note 1)
Inflation 12-month average inflation rate Inflation measures the increase in price of goods and services over time.
  • If prices increase 3%, and the economy grows 3%, it can be said that the economy is standing still since the total increase in the economy can be attributed solely to the increase in prices.
  • The effects of inflation can be removed by dividing the annual change in an indicator by (1 ± the inflation rate).
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Bureau of Labor Statistics, CPI-U, US City Average, not seasonally adjusted. Click the dinosaur icon on the right to access the annual CPI change. http://data.bls.gov/cpi/ Download PDF 12 month % change in CPI measured in December each year
Interest Rates 12-month average federal funds rate The federal funds rate is set by the Federal Reserve Board of Governors.
  • All other interest rates such as the Prime Rate and mortgage rates are keyed to this rate. Read More
  • Technically, the federal funds rate is the interest rate charged by banks with excess reserves at a Federal Reserve district bank to banks needing overnight loans to meet reserve requirements.
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Federal Reserve Bank http://www.federalreserve.gov/ Releases/H15/data.htm Download PDF 12-month average federal funds rate
Federal Debt Annual change in the US debt (see Note 4) The federal debt is the sum total of deficits reported on line Line 46, Table 3.2, Federal Government Current Receipts & Expenditures.
  • Deficits equal the excess of government spending over revenue each year. Read More
  • The US began deficit spending in 1961.
  • Deficits can occur when government spending increases or when tax collections decrease, or both.
  • Deficits measure what happens in a single year, while the debt is the total of all annual deficits that have accumulated in prior years but not been repaid.
  • The debt is more important than a single deficit, since a deficit can be repaid relatively quickly through decreased spending or an improving economy, while the debt must generally be repaid through future taxes.
  • The debt on October 25, 2012, was $11.7 trillion, about $37,250 for each American citizen.
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Bureau of Economic Analysis http://www.bea.gov/iTable/ iTable.cfm?ReqID=9&step=1 Download PDF Federal debt (billions)
Federal Tax Receipts Annual change in federal tax receipts Federal tax receipts equal the amount reported on Line 2 of table 3.2, Federal Government Current Receipts and Expenditures, reported by the by the Bureau of Economic Analysis.
  • In 2011, 71.5% of tax receipts were raised through personal income taxes, and 22% through corporate income taxes. Various excise and other taxes make up the balance.
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Bur of Econ Analysis, Sec 3, Gov’t Cur Rec’ts & Exp, Table 3.2, Line 2 http://www.bea.gov/iTable/ iTable.cfm?ReqID=9&step=1 Download PDF Federal Current Tax Receipts (billions)
Federal Spending Annual change in federal spending Federal spending equals the amount reported on Line 20 of table 3.2, Federal Government Current Receipts and Expenditures,
reported by the by the Bureau of Economic Analysis. In 2011: Read More
  • 61% was spent on social services (primarily social security, Medicare, and Medicaid; line 28 divided by line 26).
  • 9% was spent to pay interest on the federal debt (line 35 / line 26)
  • 28% was spent on consumption (line 27 / line 26).
  • Consumption covers the amount consumed (i.e., spent) by the government to provide services.
  • Defense spending accounts for 75% of federal consumption expenditures (21% of total federal spending).
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Bur of Econ Anal, Sec 3 Gov’t Cur Rec’ts & Exp, Table 3.2, Line 20 http://www.bea.gov/iTable/ iTable.cfm?ReqID=9&step=1 Download PDF Federal Current Expenditures (billions)
Defense Spending Annual change in defense spending Defense spending is the amount reported on Line 11, Table 3.9.5, Government Consumption Expenditures and Gross Investment, Bureau of Economic Analysis. Bur of Econ Analysis Table 3.9.5, Gov’t Consumption Exp & Gross Invest, Line 11 http://www.bea.gov/iTable/ iTable.cfm?ReqID=9&step=1 Download PDF Defense consumption & investment (billions)
Social Spending Annual change in social spending Social spending is reported on Line 1 of Table 3.12, Government Social Benefits, Bureau of Economic Analysis. Social benefits in 2011 included
  • Social Security (31%)
  • Medicare (24%)
  • Unemployment (4%)
  • Veteran’s benefits (3%)
  • Welfare (SSI, or Sup. Sec. Inc., 2%)
  • Food stamps (SNAP, of Supp Nutrit Assist Prog, 3%)
  • State and local benefits (23%). The main component of this is Medicaid spending
  • These amount to 90% of all social benefits.
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Bur of Econ Anal, Social spending – Table 3.12, Line 1 (billions) http://www.bea.gov/iTable/ iTable.cfm?ReqID=9&step=1 Download PDF Government social spending (billions)
Social spending other than medical spending Annual change in social spending excluding Medicare and Medicaid Social spending is reported in Table 3.12, Government Social Benefits, Bureau of Economic Analysis.
Social spending excluding Medicare and Medicaid is the total of Line 1, Government Social Benefits, minus Medicare, Line 6, and Medicaid, Line 33.
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Bur of Econ Anal, Social spending – Table 3.12, Line 1 minus Medicare, Line 6, and Medicaid, Line 33 (billions) http://www.bea.gov/iTable/ iTable.cfm?ReqID=9&step=1 Download PDF Government social spending less Medicare and Medicaid (billions)
Government medical spending Annual change in Medicare and Medicaid spending Government medical spending is reported in Table 3.12, Government Social Benefits, Bureau of Economic Analysis, as the total of Medicare, Line 6, and Medicaid, Line 33. Bur of Econ Anal, gov’t medical spending – Table 3.12, Medicare, Line 6, and Medicaid, Line 33 (billions) http://www.bea.gov/iTable/ iTable.cfm?ReqID=9&step=1 Download PDF Medicare and Medicaid spending (billions)
Federal discretionary spending Annual change in US discretionary spending Discretionary spending refers to federal government spending that the President and Congress choose to spend.
  • Discretionary refers to spending that is not mandatory.  Mandatory spending includes Social Security, Medicare, Medicaid, and interest on the federal debt.
  • It is left to the discretion of the President through the budget he presents to Congress, and by Congress through its approval of the President’s budget.
  • Discretionary spending is reported on Line 21 of Table 3.2, Government Current Receipts and Expenditures (also reported on Line 7 of Table 3.9.5, Government Consumption Expenditures and Gross Investment), Bur of Econ Anal.
  • The defense budget accounted for 77% of 2011 federal discretionary spending.
  • In 2011, discretionary spending accounted for 28% of federal spending. Remaining federal spending consisted of interest on the federal debt (9%), social spending (62%) and subsidies (1%).
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Bur of Econ Anal, Sec 3 Gov’t Cur Rec’ts & Exp, Table 3.2, Line 21 – Consumption Expenditures http://www.bea.gov/iTable/ iTable.cfm?ReqID=9&step=1 Download PDF Federal discretionary spending (billions)
Federal Debt to GDP Ratio Annual change in the Federal Debt / GDP ratio The debt:GDP ratio compares the federal debt with the gross domestic product (GDP).
  • The debt:GDP ratio indicates the size of the federal debt relative to the GDP, and is considered a general proxy for the solvency of a country.
  • The debt:GDP ratio has risen 5 fold since 1980: the federal debt was 15% of the GDP in 1980, and 75% of the GDP in 2012.
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US Treasury: total Federal Debt at Fiscal Year End; Bureau of Economic Analysis: GDP Download PDF Federal Debt to GDP Ratio
Household median income Annual change in the ratio of the mean over median income for all family households, 1948-2011 The median income represents the midpoint value in the population metric consisting of family household income as reported by the US Census Bureau.
  • The median value means that 50% of US family households have income below this amount, and 50% of have income above this amount.
  • In 2011, the median family household income was $60,974.
  • Adjusted for inflation, the median income has risen .28% per year from 1981 through 2012. At that rate, it doubles every 249 years.
  • By contrast, median income rose 1.93% per year after inflation from 1948 through 1980; at that rate it doubles every 38 years (as it nearly did from 1948-1980).
  • The annual change in the mean / median ratio is reported from 1948-2011.
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US Census Bureau, Table F-5, Race and Hispanic Origin of Householder – Families by Median and Mean Income http://www.census.gov/hhes/ www/income/data/historical/families/ Download PDF Median Income, All Races, Current Dollars, 1947 to 2011
Household mean income Annual change in the ratio of the mean over median income for all family households, 1948-2011 The mean income represents the average family household income as reported by the US Census Bureau.
  • The mean value will be pulled upward by extremely high income levels, so income inequality can be measured by comparing the mean with the median family household income.
  • In 2011, the mean family household income was $81,007, 33% higher than the median income, the highest disparity recorded since record-keeping began in 1947.
  • The mean-over-median income premium was 15% in 1980 when Reagan became President.
  • It is 33% today, so the income disparity has more than doubled since 1980.
  • Its low point of 9.4% was reached in 1958 in the Eisenhower Administration.
  • The annual change in the mean / median ratio is reported from from 1948-2011.
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US Census Bureau, Table F-5, Race and Hispanic Origin of Householder – Families by Median and Mean Income http://www.census.gov/hhes/ www/income/data/historical/families/ Download PDF Mean Income, All Races, Current Dollars, 1947 to 2011 (Note 3)

Note 1

Unemployment rate since 1947: US Bureau of Labor Standards Unemployment Rate 1947-2012

Unemployment rate before 1948: US Bureau of Labor Standards Unemployment Rate 1929-1946

Note 2

M2 money supply since 1959: Federal Reserve Bank M2 money supply in December each year, seasonally adjusted, Series H6/H6_M2/M2.M.

M2 money supply before 1959: A Monetary History of the US, 1867-1960, Friedman M. & Schwartz A., Nat’l Bur of Econ Res, 1963, pp. 712-722, col. 9.

M2 jumped nearly 25% from 1958 to 1959, far higher than in any other year except for 1943 at the height of World War II spending.  This jump is likely due to differences in data collection methods between Milton Friedman and the Federal Reserve Bank. Therefore, the change from 1958 to 1959 change was normalized to equal the average percent change in M2 for the 5 years before 1959 (1954-1958) and for the 5 years after 1959 (1960-64). This decreased the annual percent change in M2 money supply for 1959 from 24.7% to 5.6%.

Note 3

In 1993 the mean over median premium rose 32.7% due to an increase in the maximum income levels that were reported. The revised earnings categories were: (1) maximum Social Security reported income rose from $29,999 to $49,999; (2) the Supplemental Security Income (SSI) maximum rose from $19,999 to $24,999; (3) maximum education assistance, child support, and alimony income decreased from $99,999 to $49,999; (4) maximum self employment income increased from $299,999 to $999,999; (5) wages, farm income, and income from other owned businesses increased tenfold from a maximum of $99,999 to a maximum of $999,999; and (6) maximum veterans benefits increased from $29,999 to $99,999.

Therefore, significantly higher mean income was reported in 1993 than in 1992, and this renders comparison between the 2 years suspect.  See Table F-5, footnote 23.  To avoid skewing the results, the mean over median change in 1993 was normalized to equal the average mean over median change for the 5 years before 1993 (1988-1992) and for the 5 years after 1993 (1994-1998, 10 total years).  This lowered the 1993 increase in the mean over median income percentage change from 32.7% based on amounts reported in Table F-5, to .87%, the amount reported at www.PresidentialEconomics.com.

Note 4

Federal debt shown is the cumulative increase in the net federal borrowing reported by the Bureau of Economic Analysis, NIPA Table 3.2, Line 46.  The federal government began running deficits in 1961 when it borrowed $4.3 billion.  By 1968, the total federal debt was $36 billion.  The inflation-adjusted annual growth in the debt from 1961 through 1968 exceeded 38%, four times larger than the  9.32% average annual debt growth rate of from 1969 through 2012.

The annual growth in the debt is therefore only calculated beginning in 1969.  The 1968 debt of $36 billion inflated to current dollars equals $415 billion, only 3.5% of the current federal debt of $11.7 trillion.  The 1961-68  debt growth is not graphed because the 38% annual debt growth rate is so high and the 1961-68 debt amount is small relative to the current debt.   Including the 1961-68 debt growth rate in graphs at www.presidentialeconomics.com would render data comparisons suspect.

The US Treasury  reports the federal debt at its website.  This link includes intra-governmental debt that is owed by one US department to another for which there is an offsetting loan receivable, and that amount should not be included in federal debt growth calculations.  Total federal debt including intra-governmental holdings on October 28, 2012, was $16.2 trillion, and 30% of this, or $4.8 trillion, was intra-governmental holdings.  The actual federal debt is the difference between these 2 numbers, or $11.4 trillion.

The cumulative net federal borrowings reported at NIPA Table 3.2, Line 46 from 1961 through 2012 is $11.7 trillion, 3.3% higher than the $11.4 trillion debt reported by the US Treasury at its website.  The annual debt borrowings reported on line 46 of NIPA Table 3.2 is used at www.presidentialeconomics.com because the NIPA tables permit the user to determine what caused the debt to increase each year by consulting the individual components of table 3.2 and the other NIPA tables reported by the Bureau of Economic Analysis at its website.

How the graphs are constructed:

An index is constructed to accumulate each year’s economic change.  A spreadsheet accumulates the annual change in an economic indicator (such as Social Spending) to an index value that is set at 1.00 in the first year of the analysis period.  The index is then multiplied each year by (1 ± the annual change).  For instance, if the indicator grew 5.6% in 1981, the index at the beginning of 1981 would be 1.000 and the index would be 1.056 at the end of 1981; if the indicator grew 10% in 1982, the index would be 1.1616 at the end of 1982; and so on.

The compound, or average, rate of return is then calculated during each period measured by the formula:

  • ((Ending index value / Beginning index value) ^ (1 / # years in analysis period) – 1)
The compound return is the average return each year during the period being analyzed.  If the beginning index value is multiplied by (1 ± compound return) each year during the analysis period, the final index value will be identical to the index value that is calculated by accumulating each year’s actual change to the index. When multiple presidential terms are analyzed, the index value at the end of the previous presidential term for that party carries forward and becomes the beginning index value for the next presidential term of that party in order to determine an overall compound rate of return for that party. To adjust for inflation, each year’s percentage change is divided by (1 + the inflation rate), as follows: Annual % change / (1 + inflation rate)