Misery Index

The misery index measures the squeeze on general standards of living as the sum of the unemployment rate and the inflation rate.  It is a nice simple measurement of how much pain there is in the American economy at any given time.  Currently, the index is around 12, which while elevated isn’t close to where it was in the 80s.

CPI is used for the inflation rate in this chart–it’s arguable whether that gives an unbiased view of the inflation rate so it’s possible this metric should be higher.

2011 Retail Sales

Retail sales for December were reported this morning mostly flat m/m which means that overall retail sales were up 6.5% y/y for 2011.

In nominal terms, it was a pretty good year for retail sales, which hit a new all time high at $4.69T.  It was the 8th largest increase in 18 years since 1993–not bad for a year in which the S&P 500 was flat.  There is quite a difference between nominal and real retail sales though.  Even though Americans are spending more dollars, those dollars are buying them fewer goods.  Real retail sales have still, 4 years later, not reached pre-recession highs.

*Millions of Dollars; Inflation adjustment to December 2011 is estimated

S&P 500 vs. Ten Year Treasury Yield

Even though the S&P 500 is getting closer and closer to reclaiming the 1300 level, the interest rate on the 10 year treasury hasn’t rebounded quite as much.  The last time the S&P 500 was at 1300, the 10 year treasury was at 3%.  Today, the bond is still struggling to get over 2%.
Perhaps this is a sign that operation twist, announced in September, continues to have an effect on the longer end of the curve?

Government Consumption Spending as Percent of Total

While looking at some GDP numbers, I noticed something interesting that I hadn’t ever before.  Government expenditures in the GDP report are smaller than those reported in the budget report.  While the budget reports government spending at ~$3.7T annually, the GDP report only reports federal expenditures at $1.25T.  This is because the budget report takes into account all expenditures, but the GDP report only takes into account government consumption expenditures (not entitlement expenditures).  Below is a chart of the ratio of government consumption expenditures (primarily defense spending) to total expenditures.  It shows the way in which entitlement spending has engulfed the Federal Budget since the 1950s.

The missing $2.5T represents the direct shift in the consumption line of GDP from the working population to the non-working population.  Apparently this amount isn’t enough for the Occupy Wall Street folks.

Click to Enlarge