I have both a procedural and a substantive response to Bill's post. I
also must apologize for the delay in responding -- I only work on this
during the week.
On procedure, the Daily Report is not intended simply as a publication
vehicle for BLS data. It is rather an internal post with, it seems to
me, 3 goals: (1) Publish the half dozen or so most important numbers
we produce every month so that we all will be aware of what other
divisions are doing, at least at the very highest level; (2) search
the major U.S. press for references to BLS data and echo them back to
us; and (3) forward some of the more interesting economics and labor
news and comment. I forward the Daily Report to the list as in
interesting capsule reference to some of the more interesting news for
us.
The item referred to below seems to fall into the third category.
There are no BLS statistics specifically referenced, and I believe
that the consumption data comes from the Census Bureau Current
Population Survey.
As to what it means, it was written by a member of the Wash. Post
Business page staff -- it should not be taken as deep economic
analysis. As far as I can tell, the author notes that the Dow or the
S&P or some other stock market average is up by 52% over the relevant
period. This factoid is only relevant to consumption inasmuch as some
of the stock is held by U.S. residents either directly or through
mutual funds and other financial intermediaries.
I agree with what seems to be Bill's political point, that wealth
generated by Wall Street is highly concentrated and that most families
have hardly noticed this purported increase in their wealth. Indeed,
I recall reading recently that personal bankruptcies are once again at
record levels.
As to the economic question posed by the Post writer, i.e., why has
savings gone up and consumption down, there are several possible
explanations:
1. Random noise in the data;
2. Time lags, the gap between the realization that paper wealth has
been created and the planning and execution of spending plans;
3. Demographics -- the U.S. has an aging population and the need for
retirement planning has recently been much emphasized in the press.
It is because questions like this are characteristically ignored that
I do not take the Post Business page as serious economic analysis. I
forward it to the list, warts and all, in the hope that we may all
keep up with the U.S. economy a bit better.
Dave
----------
Sent: Friday, May 30, 1997 12:40 PM
Subject: [PEN-L:10436] Re: FW: BLS Daily Report
I have a question on this BLS data:
On Fri, May 30, 1997 at 07:10:37 (-0700) Richardson_D writes:
>BLS DAILY REPORT, THURSDAY, MAY 29, 1997
>...
>Consumer spending has been the driving force behind the U.S. economy
>over the past year, but, ironically, American families haven't been
>spending very much of the wealth generated by the soaring U.S. stock
>market. In the past, when financial wealth increased rapidly, elated
>consumers typically could be counted on to spend so much that the
>nation's personal savings rate would fall ....For some
>not-well-understood reason, consumers have boosted their spending
much
>less than expected in response to the 52 percent rise in the value of
>their stock and mutual fund shares over the past two years. Consumer
>spending hasn't gone up even as fast as disposable personal income,
so
>that the personal savings rate went up instead of down, as it did in
>the past under similar conditions ....("Trendlines," Washington Post,
>page E1).
Is it "ironic" that "American families" don't take part quite so much
in the "soaring U.S. stock market" as the very wealthy? Does the BLS
correct or even notice this? When they say "financial wealth
increased rapidly", do they refer to 1) gross; 2) average; 3) median?
That is, does the reference to "the 52 percent rise in the value of
their stock and mutual fund shares" refer to a 52 percent rise in the
stock market, or is it *really* a measure of the rise in the stock
prices that "consumers" own? If the BLS is measuring wealth using 1)
or 2), I don't see how this paragraph is useful at all, though I may
be totally off-base.
Bill
