CMP Associates Regulation Blog: Increase in Jun 2021 of Nonfarm Payroll Jobs by 850 Thousand and Private Payroll Jobs by 662 Thousand in the Global Recession, with Output in the US Reaching a High in Feb 2020 (https://www.nber.org/cycles.html), in the Lockdown of Economic Activity in the COVID-19 Event, Twenty-Seven Million Unemployed or Underemployed in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide, Accelerating Inflation Eroding Real Wages, Cyclically Stagnating Real Disposable Income and Consumption Expenditures, Financial Repression, United States House Prices, World Cyclical Slow Growth, and Government Intervention in Globalization: Part II

Increase in Jun 2021 of Nonfarm Payroll Jobs by 850 Thousand and Private Payroll Jobs by 662 Thousand in the Global Recession, with Output in the US Reaching a High in Feb 2020 (https://www.nber.org/cycles.html), in the Lockdown of Economic Activity in the COVID-19 Event, Twenty-Seven Million Unemployed or Underemployed in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide, Accelerating Inflation Eroding Real Wages, Cyclically Stagnating Real Disposable Income and Consumption Expenditures, Financial Repression, United States House Prices, World Cyclical Slow Growth, and Government Intervention in Globalization

Carlos M. Pelaez

I Twenty-Seven Million Unemployed or Underemployed in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide

IA2 Number of People in Job Stress

IA3 Long-term and Cyclical Comparison of Employment

IA4 Job Creation

IB Stagnating Real Wages

I Stagnating Real Disposable Income and Consumption Expenditures

IIB1 Stagnating Real Disposable Income and Consumption Expenditures

IB2 Financial Repression

II United States House Prices

III World Financial Turbulence

IV Global Inflation

V World Economic Slowdown

VA United States

VB Japan

VC China

VD Euro Area

VE Germany

VF France

VG Italy

VH United Kingdom

VI Valuation of Risk Financial Assets

VII Economic Indicators

VIII Interest Rates

IX Conclusion

References

Appendixes

Appendix I The Great Inflation

IIIB Appendix on Safe Haven Currencies

IIIC Appendix on Fiscal Compact

IIID Appendix on European Central Bank Large Scale Lender of Last Resort

IIIG Appendix on Deficit Financing of Growth and the Debt Crisis

I IB Stagnating Real Disposable Income and Consumption Expenditures. The Bureau of Economic Analysis (BEA) provides important revisions and enhancements of data on personal income and outlays since 1929 (http://www.bea.gov/iTable/index_nipa.cfm). There are waves of changes in personal income and expenditures in Table IB-1 that correspond somewhat to inflation waves observed worldwide (https://cmpassocregulationblog.blogspot.com/2021/01/us-gdp-growing-at-saar-40-percent-in.html and earlier https://cmpassocregulationblog.blogspot.com/2020/12/us-gdp-growing-at-saar-334-percent-in.html) because of the influence through price indexes. There are wide fluctuations in Nov and Dec 2012 by the rush to realize income of all forms in anticipation of tax increases beginning in Jan 2013. There is major distortion in Jan 2013 because of higher contributions in payrolls to government social insurance that caused sharp reduction in personal income and disposable personal income. The Bureau of Economic Analysis (BEA) explains as follows (page 3 http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0313.pdf):

“The February and January [2013] changes in disposable personal income (DPI) mainly reflected the effect of special factors in January, such as the expiration of the “payroll tax holiday” and the acceleration of bonuses and personal dividends to November and to December [2012] in anticipation of changes in individual tax rates.”

The BEA provides the annual update of the national income and product account (https://cmpassocregulationblog.blogspot.com/2017/07/data-dependent-monetary-policy-with_30.html): “Annual Update of the National Income and Product Accounts

The estimates released today reflect the results of the annual update of the national income and

product accounts (NIPAs) in conjunction with preliminary estimates for June 2017. The update covers the most recent 3 years and the first 5 months of 2017. For more information, see information on the “2017 Annual Update” on BEA’s website. Additionally, the August Survey of Current Business will contain an article that describes the results in detail.”

The BEA provides “Comprehensive Update of the National Income and Product Accounts” on Jul 31, 2018 with revisions since 1929 (https://cmpassocregulationblog.blogspot.com/2018/07/revision-of-united-states-national.html): “The estimates released today also reflect the results of the 15th comprehensive update of the National Income and Product Accounts (NIPAs). The updated estimates reflect previously announced improvements (https://www.bea.gov/scb/2018/04-april/0418-preview-2018-comprehensive-nipa-update.htm), and include the introduction of new not seasonally adjusted estimates for GDP, GDI and their major components. For more information, see the Technical Note. Revised NIPA table stubs, initial results, and background materials are available on the BEA website (https://www.bea.gov/index.htm ).” The BEA provides the “Annual Update of the National Income and Product Accounts” on Jul 26, 2019 (https://www.bea.gov/system/files/2019-07/NIPA-AU19-Briefing.pdf).

The BEA provides the annual update of the National Income and Product Accounts on Jul 31, 2020 (https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf): “The estimates released today also reflect the results of the Annual Update of the National Income and

Product Accounts (NIPAs). The timespan of the update is the first quarter of 2015 through the fourth quarter of 2019 for estimates of real GDP and its major components, and the first quarter of 1999 through the fourth quarter of 2019 for estimates of income and saving. The reference year remains 2012. More information on the 2020 Annual Update is included in the May Survey of Current Business article, “GDP and the Economy.””

The emphasis is now shifting to the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event. In the first wave, nominal personal income increased at 2.4 percent in Jan 2019 while nominal disposable personal income decreased at 1.2 percent. Nominal personal consumption expenditures increased at 8.7 percent. Real disposable income changed at 0.0 percent and real personal consumption expenditures increased at 8.7 percent. In the second wave, nominal personal income increased at 4.3 percent in Feb-Mar 2019 while nominal disposable personal income increased at 3.0 percent. Nominal personal consumption expenditures increased at 6.2 percent. Real disposable income increased at 0.6 percent and real personal consumption expenditures increased at 4.3 percent. In the third wave, nominal personal income increased at 2.0 percent in Apr-Jun 2019 while nominal disposable income increased at 1.6 percent. Nominal personal consumption expenditures increased at 4.9 percent. Real disposable income decreased at 1.2 percent and real personal consumption expenditures increased at 2.8 percent. In the fourth wave, nominal personal income increased at 1.2 percent annual equivalent in Jul 2019 while nominal disposable income increased at 3.7 percent. Nominal personal consumption increased at 4.9 percent. Real disposable income increased at 1.2 percent and real personal consumption expenditures increased at 2.4 percent. In the fifth wave, nominal personal income increased at 4.3 percent annual equivalent in Aug-Sep 2019 while nominal disposable income increased at 4.9 percent. Nominal personal consumption increased at 3.0 percent. Real disposable income increased at 3.7 percent and real personal consumption expenditures increased at 1.8 percent. In the sixth wave, nominal personal income increased at 3.7 percent annual equivalent in Oct-Dec 2019 while nominal disposable income increased at 2.8 percent. Nominal personal consumption increased at 3.7 percent. Real disposable income increased at 0.8 percent and real personal consumption expenditures increased at 1.2 percent. In the seventh wave, nominal personal income increased at 10.7 percent annual equivalent in Jan-Feb 2020 while nominal disposable income increased at 10.0 percent. Nominal personal consumption increased at 3.7 percent. Real disposable income increased at 8.1 percent and real personal consumption expenditures increased at 1.8 percent. In the eighth wave, in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event, nominal personal income increased at 80.8 percent annual equivalent in Mar-Apr 2020 while nominal disposable income increased at 108.7 percent. Nominal personal consumption decreased at 70.8 percent. Real disposable income increased at 119.3 percent and real personal consumption expenditures decreased at 69.6 percent. The BEA explains (https://www.bea.gov/sites/default/files/2020-05/pi0420_0.pdf): “The increase in personal income in April primarily reflected an increase in government social benefits to persons as payments were made to individuals from federal economic recovery programs in response to the COVID-19 pandemic (table 3). For more information, see “How are the economic impact payments for individuals authorized by the CARES Act of 2020 recorded in the NIPAs?” “Other government social benefits to persons” are $3,122.1 billion in Apr 2020 compared with $528.3 billion in Mar 2020 (https://www.bea.gov/sites/default/files/2020-05/pi0420_0.pdf). In the ninth wave, in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event, nominal personal income decreased at 26.8 percent annual equivalent in May-Jun 2020 while nominal disposable income decreased at 31.2 percent. Nominal personal consumption increased at 140.7 percent. Real disposable income decreased at 33.2 percent and real personal consumption expenditures increased at 130.1 percent. The BEA explains as follows (https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf): “The May estimate for personal income and outlays was impacted by the response to the spread

of COVID-19. Federal economic recovery payments continued but were at a lower level than in

April, and government “stay-at-home” orders were partially lifted in May. The full economic

effects of the COVID-19 pandemic cannot be quantified in the personal income and outlays

estimate for May because the impacts are generally embedded in source data and cannot be

separately identified. For more information, see the “highlights” file and the Effects of Selected

Federal Pandemic Response Programs on Personal Income table.” The BEA explains as follows (https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf): “The decrease in personal income in June was more than accounted for by a decrease in government social benefits to persons as payments made to individuals from federal economic recovery programs in response to the COVID-19 pandemic continued, but at a lower level than in May (table 3). For more

information, see “How are the economic impact payments for individuals authorized by the CARES Act of 2020 recorded in the NIPAs? Partially offsetting the decrease in other government social benefits were increases in compensation of employees and proprietors’ income as portions of the economy continued to reopen in June.

Unemployment insurance benefits, based primarily on unemployment claims data from the Department of Labor’s Employment and Training Administration, also increased in June. For more information, see “How will the expansion of unemployment benefits in response to the COVID-19 pandemic be recorded

in the NIPAs?”.” In the ninth wave, in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event, nominal personal income increased at 8.7 percent annual equivalent in Jul 2020 while nominal disposable income increased at 7.4 percent. Nominal personal consumption increased at 19.6 percent. Real disposable income increased at 3.7 percent and real personal consumption expenditures increased at 15.4 percent. The BEA explains as follows (https://www.bea.gov/sites/default/files/2020-08/pi0720.pdf): “The July estimate for personal income and outlays was impacted by the response to the spread of COVID-19. Federal economic recovery payments continued but were at a lower level than in June,

and government “stay-at-home” orders lifted in some areas of the country. The full economic

effects of the COVID-19 pandemic cannot be quantified in the personal income and outlays

estimate because the impacts are generally embedded in source data and cannot be separately

identified. For more information, see Effects of Selected Federal Pandemic Response Programs on Personal Income. The increase in personal income in July was more than accounted for by compensation of employees as portions of the economy continued to reopen (table 3). Proprietors’ income and rental income of persons also contributed to the increase. Partially offsetting these increases were decreases in government social benefits and income on assets.

Unemployment insurance benefits, based primarily on unemployment claims data from the Department of Labor’s Employment and Training Administration, decreased in July. For more information, see “How will federal government responses to the COVID-19 pandemic affect unemployment insurance benefits?”.” In the tenth wave, in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event, nominal personal income decreased at 28.0 percent annual equivalent in Aug 2020 while nominal disposable income decreased at 32.3 percent. Nominal personal consumption increased at 15.4 percent. Real disposable income decreased at 34.8 percent and real personal consumption expenditures increased at 11.4 percent. The BEA explains as follows (https://www.bea.gov/sites/default/files/2020-10/pi0820.pdf): “The decrease in personal income in August was more than accounted for by a decrease in

unemployment insurance benefits, based primarily on unemployment claims data from the Department of Labor’s Employment and Training Administration (table 3). In particular, the Federal Pandemic Unemployment Compensation program which provided a temporary weekly supplemental payment of $600 for those receiving unemployment benefits expired on July 31. For more information, see “How

will federal government responses to the COVID-19 pandemic affect unemployment insurance

benefits?”. Partially offsetting the decrease in unemployment insurance benefits was an increase in compensation in August. Government wage and salary disbursements increased $17.5 billion in August, following an increase of $14.5 billion in July. Temporary and intermittent Census decennial workers boosted government wages and salaries by $10.8 billion in August.” In the eleventh wave, in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event, nominal personal income increased at 8.7 percent annual equivalent in Sep 2020 while nominal disposable income increased at 8.7 percent. Nominal personal consumption increased at 16.8 percent. Real disposable income increased at 6.2 percent and real personal consumption expenditures increased at 14.0 percent. The BEA explains the process (https://www.bea.gov/sites/default/files/2020-10/pi0920.pdf). In the eleventh wave, in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event, nominal personal income decreased at 6.4 percent annual equivalent in Oct-Nov 2020 while nominal disposable income decreased at 9.2 percent. Nominal personal consumption decreased at 1.8 percent. Real disposable income decreased at 9.2 percent and real personal consumption expenditures decreased at 1.8 percent. The BEA explains the process (https://www.bea.gov/sites/default/files/2020-11/pi1020.pdf and https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf). In the twelfth wave, in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event, nominal personal income increased at 86.8 percent annual equivalent in Dec 2020-Jan 2021 while nominal disposable income increased at 100.4 percent. Nominal personal consumption increased at 17.2 percent. Real disposable income increased at 92.5 percent and real personal consumption expenditures increased at 13.1 percent. The BEA explains the process (https://www.bea.gov/sites/default/files/2021-02/pi0121.pdf). In the thirteenth wave, in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event, nominal personal income decreased at 57.6 percent annual equivalent in Feb 2021 while nominal disposable income decreased at 62.3 percent. Nominal personal consumption decreased at 11.4 percent. Real disposable income decreased at 63.7 percent and real personal consumption expenditures decreased at 14.5 percent. The BEA explains the process (https://www.bea.gov/sites/default/files/2021-03/pi0221.pdf). In the fourteenth wave, in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event, nominal personal income increased at 875.2 percent annual equivalent in Mar 2021 while nominal disposable income increased at 1146.8 percent. Nominal personal consumption increased at 79.6 percent. Real disposable income increased at 1075.9 percent and real personal consumption expenditures decreased at 67.7 percent. The BEA explains the process (https://www.bea.gov/sites/default/files/2021-04/pi0321.pdf): “The increase in personal income in March largely reflected an increase in government social benefits (table 3). Within government social benefits, “other” social benefits increased. The American Rescue Plan Act established an additional round of direct economic impact payments to households.” In the fifteenth wave, in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event, nominal personal income decreased at 61.9 percent annual equivalent in Apr-May 2021 while nominal disposable income decreased at 66.3 percent. Nominal personal consumption increased at 5.5 percent. Real disposable income decreased at 68.4 percent and real personal consumption expenditures decreased at 0.6 percent. The BEA explains the process (https://www.bea.gov/sites/default/files/2021-05/pi0421.pdf): “The decrease in personal income in April primarily reflected a decrease in government social benefits (table 3). Within government social benefits, "other" social benefits decreased as economic impact payments made to individuals from the American Rescue Plan Act of 2021 continued, but at a lower level than in March. Unemployment insurance also decreased, led by decreases in payments from the Pandemic Unemployment Compensation program.” The BEA explains further (https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf): “The decrease in personal income in May primarily reflected a decrease in government social benefits (table 3). Within government social benefits, "other" social benefits decreased as economic impact payments made to individuals from the American Rescue Plan Act of 2021 continued, but at a lower level than in April. Unemployment insurance also decreased, led by decreases in payments from the Pandemic Unemployment Compensation program.”

The United States economy has grown at the average yearly rate of 3 percent per year and 2 percent per year in per capita terms from 1870 to 2010, as measured by Lucas (2011May). An important characteristic of the economic cycle in the US has been rapid growth in the initial phase of expansion after recessions. Inferior performance of the US economy and labor markets is the critical current issue of analysis and policy design. Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent. The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. US economic growth has been at only 2.0 percent on average in the cyclical expansion in the 47 quarters from IIIQ2009 to IQ2021 and in the global recession with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (https://apps.bea.gov/iTable/index_nipa.cfm) and the third estimate of GDP for IQ2021 (https://www.bea.gov/sites/default/files/2021-06/gdp1q21_3rd_1.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.8 percent obtained by dividing GDP of $15,557.3 billion in IIQ2010 by GDP of $15,134.1 billion in IIQ2009 {[($15,557.3/$15,134.1) -1]100 = 2.8%], or accumulating the quarter on quarter growth rates (https://cmpassocregulationblog.blogspot.com/2021/06/us-gdp-growing-continuing-recovery-in.html and earlier https://cmpassocregulationblog.blogspot.com/2021/05/us-gdp-growing-at-saar-64-percent-in_29.html). The expansion from IQ1983 to IQ1986 was at the average annual growth rate of 5.7 percent, 5.3 percent from IQ1983 to IIIQ1986, 5.1 percent from IQ1983 to IVQ1986, 5.0 percent from IQ1983 to IQ1987, 5.0 percent from IQ1983 to IIQ1987, 4.9 percent from IQ1983 to IIIQ1987, 5.0 percent from IQ1983 to IVQ1987, 4.9 percent from IQ1983 to IIQ1988, 4.8 percent from IQ1983 to IIIQ1988, 4.8 percent from IQ1983 to IVQ1988, 4.8 percent from IQ1983 to IQ1989, 4.7 percent from IQ1983 to IIQ1989, 4.6 percent from IQ1983 to IIIQ1989, 4.5 percent from IQ1983 to IVQ1989. 4.5 percent from IQ1983 to IQ1990, 4.4 percent from IQ1983 to IIQ1990, 4.3 percent from IQ1983 to IIIQ1990, 4.0 percent from IQ1983 to IVQ1990, 3.8 percent from IQ1983 to IQ1991, 3.8 percent from IQ1983 to IIQ1991, 3.8 percent from IQ1983 to IIIQ1991, 3.7 percent from IQ1983 to IVQ1991, 3.7 percent from IQ1983 to IQ1992, 3.7 percent from IQ1983 to IIQ1992, 3.7 percent from IQ1983 to IIIQ1992, 3.8 percent from IQ1983 to IVQ1992, 3.7 percent from IQ1983 to IQ1993, 3.6 percent from IQ1983 to IIQ1993, 3.6 percent from IQ1983 to IIIQ1993, 3.7 percent from IQ1983 to IVQ1993, 3.7 percent from IQ1983 to IQ1994, 3.7 percent from IQ1983 to IIQ1994, 3.7 percent from IQ1983 to IIIQ1994 and at 7.9 percent from IQ1983 to IVQ1983 (https://cmpassocregulationblog.blogspot.com/2021/06/us-gdp-growing-continuing-recovery-in.html and earlier https://cmpassocregulationblog.blogspot.com/2021/05/us-gdp-growing-at-saar-64-percent-in_29.html). The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (https://apps.bea.gov/iTable/index_nipa.cfm). The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. Growth at trend in the entire cycle from IVQ2007 to IQ2021 and in the global recession with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event would have accumulated to 47.9 percent. GDP in IVQ2020 would be $23,318.7 billion (in constant dollars of 2012) if the US had grown at trend, which is higher by $4232.3 billion than actual $19,086.4 billion. There are more than four trillion dollars of GDP less than at trend, explaining the 27.4 million unemployed or underemployed equivalent to actual unemployment/underemployment of 15.8 percent of the effective labor force with the largest part originating in the global recession with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event (Section I and earlier https://cmpassocregulationblog.blogspot.com/2021/06/increase-in-may-2021-of-nonfarm-payroll.html). Unemployment is decreasing while employment is increasing in initial adjustment of the lockdown of economic activity in the global recession resulting from the COVID-19 event (https://www.bls.gov/covid19/employment-situation-covid19-faq-june-2021.htm). US GDP in IQ2021 is 18.2 percent lower than at trend. US GDP grew from $15,762.0 billion in IVQ2007 in constant dollars to $19,086.4 billion in IQ2021 or 21.1 percent at the average annual equivalent rate of 1.5 percent. Professor John H. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. Cochrane (2016May02) measures GDP growth in the US at average 3.5 percent per year from 1950 to 2000 and only at 1.76 percent per year from 2000 to 2015 with only at 2.0 percent annual equivalent in the current expansion. Cochrane (2016May02) proposes drastic changes in regulation and legal obstacles to private economic activity. The US missed the opportunity to grow at higher rates during the expansion and it is difficult to catch up because growth rates in the final periods of expansions tend to decline. The US missed the opportunity for recovery of output and employment always afforded in the first four quarters of expansion from recessions. Zero interest rates and quantitative easing were not required or present in successful cyclical expansions and in secular economic growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas (2011May). There is cyclical uncommonly slow growth in the US instead of allegations of secular stagnation. There is similar behavior in manufacturing. There is classic research on analyzing deviations of output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). The long-term trend is growth of manufacturing at average 3.0 percent per year from May 1919 to May 2021. Growth at 3.0 percent per year would raise the NSA index of manufacturing output (SIC, Standard Industrial Classification) from 106.8161 in Dec 2007 to 158.8071 in May 2021. The actual index NSA in May 2021 is 98.4433 which is 38.0 percent below trend. The underperformance of manufacturing in Mar-Aug 2020 originates partly in the earlier global recession augmented by the current global recession with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19. Manufacturing grew at the average annual rate of 3.3 percent between Dec 1986 and Dec 2006. Growth at 3.3 percent per year would raise the NSA index of manufacturing output (SIC, Standard Industrial Classification) from 106.8161 in Dec 2007 to 165.1264 in May 2021. The actual index NSA in May 2021 is 98.4433, which is 40.4 percent below trend. Manufacturing output grew at average 1.7 percent between Dec 1986 and May 2021. Using trend growth of 1.7 percent per year, the index would increase to 133.9244 in May 2021. The output of manufacturing at 98.4433 in May 2021 is 26.5 percent below trend under this alternative calculation. Using the NAICS (North American Industry Classification System), manufacturing output fell from the high of 108.5167 in Jun 2007 to the low of 84.7321 in May 2009 or 21.9 percent. The NAICS manufacturing index increased from 84.7321 in Apr 2009 to 99.0088 in May 2021 or 16.8 percent. The NAICS manufacturing index increased at the annual equivalent rate of 3.5 percent from Dec 1986 to Dec 2006. Growth at 3.5 percent would increase the NAICS manufacturing output index from 104.6868 in Dec 2007 to 166.0895 in May 2021. The NAICS index at 99.0088 in May 2021 is 40.4 below trend. The NAICS manufacturing output index grew at 1.7 percent annual equivalent from Dec 1999 to Dec 2006. Growth at 1.7 percent would raise the NAICS manufacturing output index from 104.6868 in Dec 2007 to 131.2547 in May 2021. The NAICS index at 99.0088 in May 2021 is 24.6 percent below trend under this alternative calculation.

Table IB-1, US, Percentage Change from Prior Month Seasonally Adjusted of Personal Income, Disposable Income and Personal Consumption Expenditures %

	NPI	NDPI	RDPI	NPCE	RPCE
May 2021	-2.0	-2.3	-2.8	0.0	-0.4
Apr	-13.1	-14.6	-15.1	0.9	0.3
AE ∆% Apr-May	-61.9	-66.3	-68.4	5.5	-0.6
Mar	20.9	23.4	22.8	5.0	4.4
AE ∆% Mar	875.2	1146.8	1075.9	79.6	67.7
Feb	-6.9	-7.8	-8.1	-1.0	-1.3
AE ∆% Feb	-57.6	-62.3	-63.7	-11.4	-14.5
Jan	10.2	11.5	11.2	3.3	3.0
Dec 2020	0.7	0.7	0.3	-0.6	-0.9
AE ∆% Dec-Jan	86.8	100.4	92.5	17.2	13.1
Nov	-0.9	-1.2	-1.2	-0.6	-0.6
Oct	-0.2	-0.4	-0.4	0.3	0.3
AE ∆% Oct-Nov	-6.4	-9.2	-9.2	-1.8	-1.8
Sep	0.7	0.7	0.5	1.3	1.1
AE ∆% Sep	8.7	8.7	6.2	16.8	14.0
Aug	-2.7	-3.2	-3.5	1.2	0.9
AE ∆% Aug	-28.0	-32.3	-34.8	15.4	11.4
Jul	0.7	0.6	0.3	1.5	1.2
AE ∆% Jul	8.7	7.4	3.7	19.6	15.4
Jun	-1.1	-1.4	-1.8	6.5	5.9
May	-4.0	-4.7	-4.8	8.7	8.5
AE ∆% May-Jun	-26.8	-31.2	-33.2	140.7	130.1
Apr	12.4	15.0	15.6	-12.7	-12.3
Mar	-1.8	-1.7	-1.4	-6.7	-6.5
AE ∆% Mar-Apr	80.8	108.7	119.3	-70.8	-69.6
Feb	0.8	0.7	0.6	0.0	-0.1
Jan	0.9	0.9	0.7	0.6	0.4
AE ∆% Jan-Feb	10.7	10.0	8.1	3.7	1.8
Dec 2019	0.1	0.0	-0.2	0.3	0.0
Nov	0.5	0.5	0.4	0.2	0.1
Oct	0.3	0.2	0.0	0.4	0.2
AE ∆% Oct-Dec	3.7	2.8	0.8	3.7	1.2
Sep	0.2	0.2	0.1	0.2	0.1
Aug	0.5	0.6	0.5	0.3	0.2
AE ∆% Aug-Sep	4.3	4.9	3.7	3.0	1.8
Jul	0.1	0.3	0.1	0.4	0.2
AE ∆% Jul	1.2	3.7	1.2	4.9	2.4
Jun	0.2	0.2	0.1	0.4	0.3
May	0.1	0.1	-0.1	0.3	0.2
Apr	0.2	0.1	-0.3	0.5	0.2
AE ∆% Apr-Jun	2.0	1.6	-1.2	4.9	2.8
Mar	0.3	0.2	-0.1	0.9	0.7
Feb	0.4	0.3	0.2	0.1	0.0
AE ∆% Feb-Mar	4.3	3.0	0.6	6.2	4.3
Jan	0.2	-0.1	0.0	0.7	0.7
AE ∆% Jan	2.4	-1.2	0.0	8.7	8.7

Notes: *Excluding exceptional income gains in Nov and Dec 2012 because of anticipated tax increases in Jan 2013 ((page 2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi1212.pdf). ^aExcluding employee contributions for government social insurance (pages 1-2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0113.pdf ) Excluding NPI: current dollars personal income; NDPI: current dollars disposable personal income; RDPI: chained (2005) dollars DPI; NPCE: current dollars personal consumption expenditures; RPCE: chained (2005) dollars PCE; AE: annual equivalent; IVQ2010: fourth quarter 2010; A: annual equivalent

Percentage change month to month seasonally adjusted

*∆% Dec 2011/Dec 2010 **∆% Dec 2010/Dec 2009 *** ∆% Dec 2012/Dec 2011

Source: US Bureau of Economic http://bea.gov/iTable/index_nipa.cfm

Real disposable income decreased 2.3 percent in the 12 months ending in May 2021 in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event. The BEA explains the process (https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf): “The decrease in personal income in May primarily reflected a decrease in government social benefits (table 3). Within government social benefits, "other" social benefits decreased as economic impact payments made to individuals from the American Rescue Plan Act of 2021 continued, but at a lower level than in April. Unemployment insurance also decreased, led by decreases in payments from the Pandemic Unemployment Compensation program.” RPCE growth decelerated sharply to minus 2.2 percent in Feb 2021, increasing 14.5 percent in the 12 months ending in May 2021. Subdued growth of RPCE could affect revenues of business. Growth rates of personal consumption have weakened in oscillations. Goods and especially durable goods have been driving growth of PCE as shown by the much higher 12-month rates of growth of real goods PCE (RPCEG) and real durable goods PCE (RPCEGD) than services real PCE (RPCES). Growth of consumption of goods and, in particular, of consumer durable goods drives the faster expansion of the economy while growth of consumption of services is much more moderate. In May 2021, RPCEG increased 16.6 percent in 12 months and RPCEGD increased 25.2 percent while RPCES increased 13.3 percent. Government transfers through the stimulus program to compensate for the lockdown of economic activity caused sharp increases in Mar 2021. There are limits to sustained growth based on financial repression in an environment of weak labor markets and real labor remuneration.

Table IB-2, Real Disposable Personal Income and Real Personal Consumption Expenditures

Percentage Change from the Same Month a Year Earlier %

	RDPI	RPCE	RPCEG	RPCEGD	RPCES
2021
May	-2.3	14.5	16.6	25.2	13.3
Apr	-4.4	24.7	36.0	67.9	19.4
Mar	30.3	9.2	19.5	49.3	4.2
Feb	4.6	-2.2	8.3	15.8	-6.8
Jan	14.5	-1.1	11.8	20.2	-6.7
2020
Dec	3.7	-3.5	4.7	8.5	-7.2
Nov	3.1	-2.6	7.0	11.7	-6.8
Oct	4.8	-1.9	8.3	14.8	-6.4
Sep	5.2	-1.9	8.5	13.3	-6.6
Aug	4.9	-2.9	6.7	13.0	-7.2
Jul	9.2	-3.6	6.5	12.2	-8.1
Jun	8.9	-4.6	5.8	11.0	-9.2
May	11.1	-9.6	0.6	3.1	-14.2
Apr	16.7	-16.5	-11.5	-18.7	-18.7
Mar	0.6	-4.7	1.6	-8.2	-7.5
Feb	2.0	2.6	3.9	6.8	2.0
Jan	1.5	2.7	3.8	7.5	2.2
2019
Dec	0.8	3.0	5.2	8.4	2.1
Nov	2.1	2.1	2.4	3.9	1.9
Oct	1.8	2.3	3.6	4.9	1.7
Sep	2.0	2.6	4.2	6.0	1.9
Aug	1.8	2.3	4.2	5.1	1.5
Jul	1.6	2.4	4.3	5.4	1.6
Jun	1.9	2.6	4.4	5.1	1.7
May	2.0	2.3	3.3	4.6	1.9
Apr	2.4	2.4	3.9	4.5	1.8
Mar	2.9	2.5	3.6	4.7	2.0
Feb	3.4	2.2	2.5	2.2	2.1
Jan	3.5	2.2	3.0	3.3	1.8

Notes: RDPI: real disposable personal income; RPCE: real personal consumption expenditures (PCE); RPCEG: real PCE goods; RPCEGD: RPCEG durable goods; RPCES: RPCE services

Numbers are percentage changes from the same month a year earlier

Source: US Bureau of Economic Analysis https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-1 shows US real personal consumption expenditures (RPCE) between 2002 and 2021. There is an evident drop in RPCE during the global recession in 2007 to 2009 but the slope is flatter during the current recovery than in the period before 2007 with recent recovery. The final data points in IIQ2020 shows sharp drop in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event with sharp recovery in IIIQ2020 and milder recovery in IVQ2020. Recovery gained strength in IQ2021.

Chart IB-1, US, Real Personal Consumption Expenditures, Quarterly Seasonally Adjusted at Annual Rates 2002-2021

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Percent changes from the prior period in seasonally adjusted annual equivalent quarterly rates (SAAR) of real personal consumption expenditures (RPCE) are in Chart IB-2 from 1995 to 2021. The average rate could be visualized as a horizontal line. Although there are not yet sufficient observations, it appears from Chart IB-2 that the average rate of growth of RPCE was higher before the recession than during the forty-six quarters of expansion that began in IIIQ2009. The data point in IIQ2020 shows sharp contraction in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event followed by sharp recovery in IIIQ2020, milder recovery in IVQ2020 and stronger recovery in IQ2021.

Chart IB-2, Percent Change from Prior Period in Real Personal Consumption Expenditures, Quarterly Seasonally Adjusted at Annual Rates 1995-2021

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Personal income and its disposition are in Table IB-3. The latest estimates and revisions have changed movements. (1) Decrease in May 2021 of personal income by $414.3 billion or 2.0 percent and decrease of disposable income of $436.3 billion or 2.3 percent with increase of wages and salaries of 0.8 percent in the lockdown of economic activity in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event. The BEA explains the process (https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf): “The decrease in personal income in May primarily reflected a decrease in government social benefits (table 3). Within government social benefits, "other" social benefits decreased as economic impact payments made to individuals from the American Rescue Plan Act of 2021 continued, but at a lower level than in April. Unemployment insurance also decreased, led by decreases in payments from the Pandemic Unemployment Compensation program.” (2) Increase of personal income of $877.6 billion from Dec 2019 to Dec 2020 or 4.7 percent and increase of disposable income of $822.0 billion or 5.0 percent with increase of wages and salaries of 3.5 percent. (3) Increase of personal income of $537.8 billion from Dec 2018 to Dec 2019 or 2.9 percent and increase of disposable income of $402.0 billion or 2.5 percent with increase of wages and salaries of 4.2 percent.

Table IB-3, US, Personal Income and its Disposition, Seasonally Adjusted at Annual Rates USD Billions

	Personal Income	Wages & Salaries	Personal Taxes	DPI	Savings Rate %
May 2021	20,804.2	10,152.8	2,385.1	18,419.1	12.4
Apr 2021	21,218.5	10,074.9	2,363.2	18,855.4	14.5
Change May 2021/ Apr 2021	-414.3 ∆% -2.0	77.9 ∆% 0.8	21.9 ∆% 0.9	-436.3 ∆% -2.3
Dec 2020	19,677.1	9,789.6	2287.3	17,389.8	14.2
Change Dec 2020/Dec 2019	877.6 ∆% 4.7	333.1 ∆% 3.5	54.6 ∆% 2.4	822.0 ∆% 5.0
Dec 2019	18,800.5	9,456.5	2,232.7	16,567.8	7.2
Change Dec 2019/Dec 2018	537.8 ∆% 2.9	384.4 ∆% 4.2	135.9 ∆% 6.5	402.0 ∆% 2.5
Dec 2018	18,262.7	9,072.1	2,096.8	16,165.8	9.1

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Table IB-4 provides growth rates of real disposable income and real disposable income per capita in the long-term and selected periods. Real disposable income consists of after-tax income adjusted for inflation. Real disposable income per capita is income per person after taxes and inflation. There is remarkable long-term trend of growth of real disposable income of 3.2 percent per year on average from 1929 to 2019 and 2.0 percent in real disposable income per capita. Real disposable income increased at the average yearly rate of 3.7 percent from 1947 to 1999 and real disposable income per capita at 2.3 percent. These rates of increase broadly accompany rates of growth of GDP. Institutional arrangements in the United States provided the environment for growth of output and income after taxes, inflation and population growth. There is significant break of growth by much lower 2.5 percent for real disposable income on average from 1999 to 2019 and 1.7 percent in real disposable per capita income. Real disposable income grew at 3.5 percent from 1980 to 1989 and real disposable per capita income at 2.6 percent. In contrast, real disposable income grew at only 2.2 percent on average from 2006 to 2019 and real disposable income per capita at 1.4 percent. Real disposable income grew at 2.2 percent from 2007 to 2019 and real disposable income per capita at 1.4 percent. The United States has interrupted its long-term and cyclical dynamism of output, income and employment growth. Recovery of this dynamism could prove to be a major challenge. Cyclical uncommonly slow growth explains weakness in the global recession whole cycle instead of the allegation of secular stagnation. Real disposable income increased 5.9 percent from 2019 to 2020 and real disposable income per capita 5.4 percent in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event largely because of transfers from the government.

Table IB-4, Average Annual Growth Rates of Real Disposable Income (RDPI) and Real Disposable Income per Capita (RDPIPC), Percent per Year

RDPI Average ∆%
1929-2019	3.2
1929-2020	3.2
1947-1999	3.7
1999-2019	2.5
1999-2020	2.7
1999-2006	3.2
1980-1989	3.5
2006-2019	2.2
2006-2020	2.4
2007-2019	2.2
2007-2020	2.5
2019-2020*	5.9
RDPIPC Average ∆%
1929-2019	2.0
1929-2020	2.1
1947-1999	2.3
1999-2019	1.7
1999-2020	1.9
1999-2006	2.2
1980-1989	2.6
2006-2019	1.4
2006-2020	1.7
2007-2019	1.4
2007-2020	1.7
2019-2020*	5.4

Note: *Absolute percentage change

Source: Bureau of Economic Analysis https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-3 provides personal income in the US between 1980 and 1994. These data are not adjusted for inflation that was still high in the 1980s in the exit from the Great Inflation of the 1960s and 1970s (see http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html and Appendix I The Great Inflation; see Taylor 1993, 1997, 1998LB, 1999, 2012FP, 2012Mar27, 2012Mar28, 2012JMCB and http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html http://cmpassocregulationblog.blogspot.com/2014/07/financial-irrational-exuberance.html http://cmpassocregulationblog.blogspot.com/2014/07/world-inflation-waves-united-states.html). Personal income grew steadily during the 1980s after recovery from two recessions from Jan IQ1980 to Jul IIIQ1980 and from Jul IIIQ1981 to Nov IVQ1982. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (https://apps.bea.gov/iTable/index_nipa.cfm).

Chart IB-3, US, Personal Income, Billion Dollars, Quarterly Seasonally Adjusted at Annual Rates, 1980-1994

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-4 provides personal income from 2007 to 2020. In IQ2013, personal income fell at the SAAR of minus 10.4 percent; real personal income excluding current transfer receipts at minus 11.9 percent; and real disposable personal income at minus 15.1 percent (Table 14 at https://www.bea.gov/system/files/2018-07/pi0618.pdf).The BEA explains as follows (page 3 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0313.pdf):

“The February and January changes in disposable personal income (DPI) mainly reflected the effect of special factors in January, such as the expiration of the “payroll tax holiday” and the acceleration of bonuses and personal dividends to November and to December in anticipation of changes in individual tax rates.”

In IIIQ2014, personal income grew at 6.3 percent, nominal disposable income at 5.9 percent and real disposable personal income at 4.4 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IVQ2014, personal income grew at 5.3 percent in nominal terms while nominal disposable income grew at 4.9 percent in nominal terms and at 5.4 percent in real terms (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IQ2015, nominal personal income grew at 5.6 percent while nominal disposable income grew at 4.3 percent and at 6.1 percent in real terms (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2015, nominal personal income grew at 3.8 percent while nominal disposable income grew at 3.2 percent and real disposable income grew at 1.1 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2015, nominal personal income grew at 3.5 percent while nominal disposable income grew at 3.9 percent and real disposable income grew at 2.8 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2015, nominal personal income grew at 2.2 percent while nominal disposable income grew at 2.0 percent and real disposable income at 2.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2016, personal income grew at 2.0 percent while nominal disposable income grew at 3.4 percent and real disposable income grew at 3.1 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2016, personal income grew at 2.4 percent while nominal disposable income grew at 2.1 percent and real disposable income fell at 0.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2016, personal income grew at 3.8 percent while nominal disposable income grew at 3.6 percent and real disposable income grew at 1.9 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2016, nominal personal income grew at 4.4 percent while disposable income grew at 4.4 percent and real disposable income increased at 2.5 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2017, nominal personal income grew at 6.1 percent while nominal disposable income grew at 6.6 percent and real disposable income at 4.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2017, nominal personal income grew at 4.8 percent while nominal disposable income grew at 5.3 percent and real disposable income at 2.4 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2017, nominal personal income grew at 5.0 percent while nominal disposable income grew at 4.4 percent and real disposable personal income grew at 2.7 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2017, nominal personal income grew at 6.2 percent while nominal disposable income grew at 5.0 percent and real disposable personal income grew at 2.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2018, nominal personal income grew at 6.0 percent while nominal disposable income grew at 8.0 percent and real disposable income grew at 5.2 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2018, nominal personal income grew at 4.7 percent while nominal disposable income grew at 4.9 percent and real disposable income grew at 3.6 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2018, nominal personal income grew at 5.2 percent while nominal disposable income grew at 4.9 percent and real disposable income grew at 3.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2018, nominal personal income grew at 3.5 percent while nominal disposable income grew at 4.2 percent and real disposable income grew at 2.8 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2019, nominal personal income grew at 5.3 percent and at 3.3 real percent excluding transfer receipts while nominal disposable income grew at 3.9 percent and real disposable income grew at 3.3 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-10/pi0820.pdf). In IIQ2019, nominal personal income grew at 2.5 percent and at minus 0.4 real percent excluding transfer receipts while nominal disposable income grew at 1.5 percent and real disposable income grew at minus 1.0 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf). In IIIQ2019, nominal personal income grew at 2.6 percent and at 1.0 real percent excluding transfer receipts while nominal disposable income grew at 3.5 percent and real disposable income grew at 2.1 percent (Table 6 at https://www.bea.gov/sites/default/files/2021-03/pi0221.pdf). In IVQ2019, nominal personal income grew at 3.6 percent and at 2.4 percent real excluding current transfers while nominal disposable income grew at 3.4 percent and real disposable income grew at 1.9 percent (Table 6 at https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf). In IQ2020, nominal personal income grew at 4.1 percent and increased at 1.5 percent real excluding current transfers while nominal disposable income grew at 3.9 percent and real disposable income grew at 2.6 percent (Table 6 at https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf). In IIQ2020, nominal personal income grew at 35.8 percent and decreased at 20.5 percent real excluding current transfers while nominal disposable income grew at 46.2 percent and real disposable income grew at 48.6 percent (Table 6 at https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf). In IIIQ2020, nominal personal income decreased at 11.3 percent and increased at 16.2 percent real excluding current transfers while nominal disposable income decreased at 14.4 percent and real disposable income decreased at 17.4 percent (Table 6 at https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf). In IVQ2020, nominal personal income decreased at 4.0 percent and increased at 8.4 percent real excluding current transfers while nominal disposable income decreased at 6.2 percent and real disposable income decreased at 7.6 percent (Table 6 at https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf). In IQ2021, nominal personal income increased at 60.1 percent and increased at 1.0 percent real excluding current transfers while nominal disposable income increased at 68.0percent and real disposable income increased at 62.0 percent (Table 6 at https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf).

Chart IB-4, US, Personal Income, Current Billions of Dollars, Quarterly Seasonally Adjusted at Annual Rates, 2007-2021

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Real disposable income after allowing for taxes and inflation grew steadily at high rates during the entire decade. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (https://apps.bea.gov/iTable/index_nipa.cfm).

Chart IB-5, US, Real Disposable Income, Billions of Chained 2012 Dollars, Quarterly Seasonally Adjusted at Annual Rates 1980-1994

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-6 provides real disposable income from 2007 to 2020. In IVQ2012, nominal disposable personal income grew at the SAAR of 13.3 percent and real disposable personal income at 10.9 percent (Table 2.1 http://bea.gov/iTable/index_nipa.cfm). The BEA explains as follows: “Personal income in November and December was boosted by accelerated and special dividend payments to persons and by accelerated bonus payments and other irregular pay in private wages and salaries in anticipation of changes in individual income tax rates. Personal income in December was also boosted by lump-sum social security benefit payments” (page 2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi1212.pdf pages 1-2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0113.pdf). The Bureau of Economic Analysis explains as (http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0213.pdf 2-3): “The January estimate of employee contributions for government social insurance reflected the expiration of the “payroll tax holiday,” that increased the social security contribution rate for employees and self-employed workers by 2.0 percentage points, or $114.1 billion at an annual rate. For additional information, see FAQ on “How did the expiration of the payroll tax holiday affect personal income for January 2013?” at www.bea.gov. The January estimate of employee contributions for government social insurance also reflected an increase in the monthly premiums paid by participants in the supplementary medical insurance program, in the hospital insurance provisions of the Patient Protection and Affordable Care Act, and in the social security taxable wage base.”

The increase was provided in the “fiscal cliff” law H.R. 8 American Taxpayer Relief Act of 2012 (http://www.gpo.gov/fdsys/pkg/BILLS-112hr8eas/pdf/BILLS-112hr8eas.pdf). There are revisions since 1929 (Table 6 at https://www.bea.gov/newsreleases/national/pi/2017/pdf/pi1117.pdf).

In IQ2013, personal income fell at the SAAR of minus 10.4 percent; real personal income excluding current transfer receipts at minus 11.9 percent; and real disposable personal income at minus 15.1 percent (Table 14 at https://www.bea.gov/system/files/2018-07/pi0618.pdf).The BEA explains as follows (page 3 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0313.pdf):

In IIIQ2014, personal income grew at 6.3 percent, nominal disposable income at 5.9 percent and real disposable personal income at 4.4 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IVQ2014, personal income grew at 5.3 percent in nominal terms while nominal disposable income grew at 4.9 percent in nominal terms and at 5.4 percent in real terms (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IQ2015, nominal personal income grew at 5.6 percent while nominal disposable income grew at 4.3 percent and at 6.1 percent in real terms (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2015, nominal personal income grew at 3.8 percent while nominal disposable income grew at 3.2 percent and real disposable income grew at 1.1 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2015, nominal personal income grew at 3.5 percent while nominal disposable income grew at 3.9 percent and real disposable income grew at 2.8 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2015, nominal personal income grew at 2.2 percent while nominal disposable income grew at 2.0 percent and real disposable income at 2.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2016, personal income grew at 2.0 percent while nominal disposable income grew at 3.4 percent and real disposable income grew at 3.1 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2016, personal income grew at 2.4 percent while nominal disposable income grew at 2.1 percent and real disposable income fell at 0.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2016, personal income grew at 3.8 percent while nominal disposable income grew at 3.6 percent and real disposable income grew at 1.9 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2016, nominal personal income grew at 4.4 percent while disposable income grew at 4.4 percent and real disposable income increased at 2.5 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2017, nominal personal income grew at 6.1 percent while nominal disposable income grew at 6.6 percent and real disposable income at 4.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2017, nominal personal income grew at 4.8 percent while nominal disposable income grew at 5.3 percent and real disposable income at 2.4 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2017, nominal personal income grew at 5.0 percent while nominal disposable income grew at 4.4 percent and real disposable personal income grew at 2.7 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2017, nominal personal income grew at 6.2 percent while nominal disposable income grew at 5.0 percent and real disposable personal income grew at 2.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2018, nominal personal income grew at 6.0 percent while nominal disposable income grew at 8.0 percent and real disposable income grew at 5.2 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2018, nominal personal income grew at 4.7 percent while nominal disposable income grew at 4.9 percent and real disposable income grew at 3.6 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2018, nominal personal income grew at 5.2 percent while nominal disposable income grew at 4.9 percent and real disposable income grew at 3.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2018, nominal personal income grew at 3.5 percent while nominal disposable income grew at 4.2 percent and real disposable income grew at 2.8 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2019, nominal personal income grew at 5.3 percent and at 3.3 real percent excluding transfer receipts while nominal disposable income grew at 3.9 percent and real disposable income grew at 3.3 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-10/pi0820.pdf). In IIQ2019, nominal personal income grew at 2.5 percent and at minus 0.4 real percent excluding transfer receipts while nominal disposable income grew at 1.5 percent and real disposable income grew at minus 1.0 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf). In IIIQ2019, nominal personal income grew at 2.6 percent and at 1.0 real percent excluding transfer receipts while nominal disposable income grew at 3.5 percent and real disposable income grew at 2.1 percent (Table 6 at https://www.bea.gov/sites/default/files/2021-02/pi0121.pdf). In IVQ2019, nominal personal income grew at 3.6 percent and at 2.4 percent real excluding current transfers while nominal disposable income grew at 3.4 percent and real disposable income grew at 1.9 percent (Table 6 at https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf). In IQ2020, nominal personal income grew at 4.1 percent and increased at 1.5 percent real excluding current transfers while nominal disposable income grew at 3.9 percent and real disposable income grew at 2.6 percent (Table 6 at https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf). In IIQ2020, nominal personal income grew at 35.8 percent and decreased at 20.5 percent real excluding current transfers while nominal disposable income grew at 46.2 percent and real disposable income grew at 48.6 percent (Table 6 at https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf). In IIIQ2020, nominal personal income decreased at 11.3 percent and increased at 16.2 percent real excluding current transfers while nominal disposable income decreased at 14.4 percent and real disposable income decreased at 17.4 percent (Table 6 at https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf). In IVQ2020, nominal personal income decreased at 4.0 percent and increased at 8.4 percent real excluding current transfers while nominal disposable income decreased at 6.2 percent and real disposable income decreased at 7.6 percent (Table 6 at https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf). In IQ2021, nominal personal income increased at 60.1 percent and increased at 1.0 percent real excluding current transfers while nominal disposable income increased at 68.0percent and real disposable income increased at 62.0 percent (Table 6 at https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf).

Chart IB-6, US, Real Disposable Income, Billions of Chained 2012 Dollars, Quarterly Seasonally Adjusted at Annual Rates, 2007-2021

https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-7 provides percentage quarterly changes in real disposable income from the preceding period at seasonally adjusted annual rates from 1980 to 1994. Rates of changes were high during the decade with few negative changes. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (https://apps.bea.gov/iTable/index_nipa.cfm).

Chart IB-7, US, Real Disposable Income Percentage Change from Preceding Period at Quarterly Seasonally Adjusted Annual Rates, 1980-1994

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-8 provides percentage quarterly changes in real disposable income from the preceding period at seasonally adjusted annual rates from 2007 to 2020. There has been a period of positive rates followed by decline of rates and then negative and low rates in 2011. Recovery in 2012 has not reproduced the dynamism of the brief early phase of expansion. In IVQ2012, nominal disposable personal income grew at the SAAR of 13.3 percent and real disposable personal income at 10.9 percent (Table 2.1 http://bea.gov/iTable/index_nipa.cfm). The BEA explains as follows: “Personal income in November and December was boosted by accelerated and special dividend payments to persons and by accelerated bonus payments and other irregular pay in private wages and salaries in anticipation of changes in individual income tax rates. Personal income in December was also boosted by lump-sum social security benefit payments” (page 2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi1212.pdf pages 1-2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0113.pdf). The Bureau of Economic Analysis explains as (http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0213.pdf 2-3): “The January estimate of employee contributions for government social insurance reflected the expiration of the “payroll tax holiday,” that increased the social security contribution rate for employees and self-employed workers by 2.0 percentage points, or $114.1 billion at an annual rate. For additional information, see FAQ on “How did the expiration of the payroll tax holiday affect personal income for January 2013?” at www.bea.gov. The January estimate of employee contributions for government social insurance also reflected an increase in the monthly premiums paid by participants in the supplementary medical insurance program, in the hospital insurance provisions of the Patient Protection and Affordable Care Act, and in the social security taxable wage base.”

In IIIQ2014, personal income grew at 6.3 percent, nominal disposable income at 5.9 percent and real disposable personal income at 4.4 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IVQ2014, personal income grew at 5.3 percent in nominal terms while nominal disposable income grew at 4.9 percent in nominal terms and at 5.4 percent in real terms (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IQ2015, nominal personal income grew at 5.6 percent while nominal disposable income grew at 4.3 percent and at 6.1 percent in real terms (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2015, nominal personal income grew at 3.8 percent while nominal disposable income grew at 3.2 percent and real disposable income grew at 1.1 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2015, nominal personal income grew at 3.5 percent while nominal disposable income grew at 3.9 percent and real disposable income grew at 2.8 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2015, nominal personal income grew at 2.2 percent while nominal disposable income grew at 2.0 percent and real disposable income at 2.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2016, personal income grew at 2.0 percent while nominal disposable income grew at 3.4 percent and real disposable income grew at 3.1 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2016, personal income grew at 2.4 percent while nominal disposable income grew at 2.1 percent and real disposable income fell at 0.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2016, personal income grew at 3.8 percent while nominal disposable income grew at 3.6 percent and real disposable income grew at 1.9 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2016, nominal personal income grew at 4.4 percent while disposable income grew at 4.4 percent and real disposable income increased at 2.5 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2017, nominal personal income grew at 6.1 percent while nominal disposable income grew at 6.6 percent and real disposable income at 4.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2017, nominal personal income grew at 4.8 percent while nominal disposable income grew at 5.3 percent and real disposable income at 2.4 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2017, nominal personal income grew at 5.0 percent while nominal disposable income grew at 4.4 percent and real disposable personal income grew at 2.7 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2017, nominal personal income grew at 6.2 percent while nominal disposable income grew at 5.0 percent and real disposable personal income grew at 2.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2018, nominal personal income grew at 6.0 percent while nominal disposable income grew at 8.0 percent and real disposable income grew at 5.2 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2018, nominal personal income grew at 4.7 percent while nominal disposable income grew at 4.9 percent and real disposable income grew at 3.6 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2018, nominal personal income grew at 5.2 percent while nominal disposable income grew at 4.9 percent and real disposable income grew at 3.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2018, nominal personal income grew at 3.5 percent while nominal disposable income grew at 4.2 percent and real disposable income grew at 2.8 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2019, nominal personal income grew at 5.3 percent and at 3.3 real percent excluding transfer receipts while nominal disposable income grew at 3.9 percent and real disposable income grew at 3.3 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-10/pi0820.pdf). In IIQ2019, nominal personal income grew at 2.5 percent and at minus 0.4 real percent excluding transfer receipts while nominal disposable income grew at 1.5 percent and real disposable income grew at minus 1.0 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf). In IIIQ2019, nominal personal income grew at 2.6 percent and at 1.0 real percent excluding transfer receipts while nominal disposable income grew at 3.5 percent and real disposable income grew at 2.1 percent (Table 6 at https://www.bea.gov/sites/default/files/2021-02/pi0121.pdf). In IVQ2019, nominal personal income grew at 3.6 percent and at 2.4 percent real excluding current transfers while nominal disposable income grew at 3.4 percent and real disposable income grew at 1.9 percent (Table 6 at https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf). In IQ2020, nominal personal income grew at 4.1 percent and increased at 1.5 percent real excluding current transfers while nominal disposable income grew at 3.9 percent and real disposable income grew at 2.6 percent (Table 6 at https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf). In IIQ2020, nominal personal income grew at 35.8 percent and decreased at 20.5 percent real excluding current transfers while nominal disposable income grew at 46.2 percent and real disposable income grew at 48.6 percent (Table 6 at https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf). In IIIQ2020, nominal personal income decreased at 11.3 percent and increased at 16.2 percent real excluding current transfers while nominal disposable income decreased at 14.4 percent and real disposable income decreased at 17.4 percent (Table 6 at https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf). In IVQ2020, nominal personal income decreased at 4.0 percent and increased at 8.4 percent real excluding current transfers while nominal disposable income decreased at 6.2 percent and real disposable income decreased at 7.6 percent (Table 6 at https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf). In IQ2021, nominal personal income increased at 60.1 percent and increased at 1.0 percent real excluding current transfers while nominal disposable income increased at 68.0percent and real disposable income increased at 62.0 percent (Table 6 at https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf).

Chart, IB-8, US, Real Disposable Income, Percentage Change from Preceding Period at Seasonally Adjusted Annual Rates, 2007-2021

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

The Bureau of Economic Analysis (BEA) estimates US personal income in May 2021 at the seasonally adjusted annual rate of $20,804.2 billion, as shown in Table IB-3 above (see Table 1 at https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf). The major portion of personal income is compensation of employees of $12,396.7 billion, or 59.6 percent of the total. Wages and salaries are $10,152.8 billion, of which $8,692.3 billion by private industries and supplements to wages and salaries of $2,243.9 billion (contributions to government social insurance are $709.4 billion). “Other government social benefits to persons” are $864.7 billion in May 2021 compared with $653.9 billion in Dec 2020, $2354.0 billion in Jan 2021, with $3,379.3 billion in Apr 2020, $4,748.2 billion in Mar 2021 and $1404.1 billion in Apr 2021 (https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf). In Oct 1994 (at the comparable month after the 47^th quarter of cyclical expansion), US personal income was $6,071.6 billion at SAAR (https://apps.bea.gov/iTable/index_nipa.cfm). Compensation of employees was $4,085.9 billion, or 67.3 percent of the total. Wages and salaries were $3,309.0 billion of which $2,693.4 billion by private industries. Supplements to wages and salaries were $776.9 billion with employer contributions to pension and insurance funds of $517.8 billion and $259.1 billion to government social insurance. Chart IB-9 provides US wages and salaries by private industries in the 1980s and 1990-1994. Growth was robust after the interruption of the recessions. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (https://apps.bea.gov/iTable/index_nipa.cfm).

Chart IB-9, US, Wages and Salaries, Private Industries, Quarterly, Seasonally Adjusted at Annual Rates Billions of Dollars, 1980-1994

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-10, US, Wage and Salary Disbursement, Private Industries, Quarterly, Seasonally Adjusted at Annual Rates, Billions of Dollars 2007-2021

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-11 provides finer detail with monthly wages and salaries of private industries from 2007 to 2021. Anticipations of income in late 2012 to avoid tax increases in 2013 cloud comparisons. There is sharp contraction in Mar-Apr 2020 with recovery after May 2020 in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event.

Chart IB-11, US, Wages and Salaries, Private Industries, Monthly, Seasonally Adjusted at Annual Rates, Billions of Dollars 2007-2021

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-12 provides monthly real disposable personal income per capita from 1980 to 1994. This is the ultimate measure of wellbeing in receiving income by obtaining the value per inhabitant. The measure cannot adjust for the distribution of income. Real disposable income per capita grew rapidly during the expansion after 1983 and continued growing during the rest of the decade. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (https://apps.bea.gov/iTable/index_nipa.cfm).

Chart IB-12, US, Real Disposable Per Capita Income, Monthly, Seasonally Adjusted at Annual Rates, Chained 2012 Dollars 1980-1994

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Table IB-5 provides the comparison between the cycle of the 1980s and the current cycle. Real per capita disposable income (RDPI-PC) increased 29.3 percent from Dec 1979 to Aug 1993. In the comparable period in the current cycle from Dec 2007 to Feb 2020, real per capita disposable income increased 20.8 percent. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). Real per capita disposable income (RDPI-PC) increased 30.0 percent from Dec 1979 to Feb 1994. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (https://apps.bea.gov/iTable/index_nipa.cfm). In the comparable period in the current cycle from Dec 2007 to Feb 2020, real per capita disposable income increased 24.3 percent. The YOY increase of real per capita income in Mar 2020 of 0.1 percent, the increase of 16.1 percent in Apr 2020, the increase of 10.6 percent in May 2020, the increase of 8.4 percent in Jun 2020, the increase of 8.6 percent in Jul 2020, the increase of 4.3 percent in Aug 2020, the increase of 4.7 percent in Sep 2020, the increase of 4.2 percent in Oct 2020, the increase of 2.6 percent in Nov 2020, the increase of 3.2 percent in Dec 2020, the increase in 14.0 percent in Jan 2021, the increase of 4.2 percent in Feb 2021, the increase of 29.7 percent in Mar 2021, the decrease of 4.8 percent in Apr 2021 and the decrease of 2.7 percent in May 2021 reflect government transfers of social benefits in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event. The BEA explains as follows (https://www.bea.gov/sites/default/files/2020-11/pi1020.pdf): “The decrease in personal income in October was led by a decrease in government social benefits (table 3). Within government social benefits, “other” social benefits decreased which primarily reflected a decrease in Lost Wages Supplemental Payments, a Federal Emergency Management Agency program that provides wage assistance to individuals impacted by the pandemic. Offsetting the decrease in government social benefits were increases in compensation and proprietors’ income (led by farm). Within compensation, an increase in private wages and salaries was partly offset by a decrease in government wages and salaries, which decreased $8.4 billion in October, following a decrease of $8.2 billion in September and an increase of $22.8 billion in August. Temporary and intermittent decennial Census workers boosted government wages by $3.7 billion in October after adding $9.3 billion in September and $10.9 billion in August. Within farm proprietors’ income, there was an increase in payments under the Coronavirus Food Assistance Program related to supporting farmers and ranchers impacted by COVID-19.” There is further explanation by the BEA (https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf https://www.bea.gov/sites/default/files/2021-01/pi1220.pdf https://www.bea.gov/sites/default/files/2021-02/pi0121.pdf https://www.bea.gov/sites/default/files/2021-03/pi0221.pdf https://www.bea.gov/sites/default/files/2021-04/pi0321.pdf https://www.bea.gov/sites/default/files/2021-05/pi0421.pdf https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf)

Table IB-5, Percentage Changes of Real Disposable Personal Income Per Capita

Month	RDPI-PC ∆% 12/79	RDPI-PC ∆% YOY	Month	RDPI-PC ∆% 12/07	RDPI-PC ∆% YOY
11/1982	2.7	0.6	6/2009	-0.6	-1.8
12/1982	3.1	1.2	9/2009	-1.4	-0.5
12/1983	8.2	5.0	6/2010	0.5	1.2
12/1987	20.6	2.8	6/2014	5.7	3.1
1/1988	20.8	2.6	7/2014	6.0	3.5
2/1988	21.4	2.7	8/2014	6.4	3.8
3/1988	21.9	3.0	9/2014	6.7	3.6
4/1988	22.2	7.4	10/2014	7.1	4.4
5/1988	22.3	3.3	11/2014	7.5	4.5
6/1988	22.6	3.8	12/2014	8.1	4.9
6/1989	24.5	1.6	12/2015	10.3	2.1
6/1990	26.9	1.9	12/2016	11.4	1.0
6/1991	25.7	-0.9	12/2017	14.6	2.8
6/1992	29.5	3.0	12/2018	18.9	3.8
7/1992	29.2	3.1	1/2019	18.9	3.0
8/1992	29.5	3.3	2/2019	19.0	2.9
9/1992	28.8	2.5	3/2019	18.9	2.4
10/1992	27.8	1.7	04/2019	18.6	1.9
11/1992	27.9	1.7	05/2019	18.5	1.6
12/1992	32.3	4.4	06/2019	18.5	1.4
1/1993	29.3	1.1	07/2019	18.6	1.1
2/1993	29.8	1.1	08/2019	19.1	1.3
3/1993	29.2	0.7	09/2019	19.2	1.5
4/1993	29.8	0.9	10/2019	19.2	1.3
5/1993	29.5	0.3	11/2019	19.6	1.6
6/1993	29.1	-0.3	12/2019	19.3	0.3
7/1993	29.2	0.0	1/2020	20.1	1.1
8/1993	29.3	-0.2	2/2020	20.8	1.5
9/1993	28.8	0.0	3/2020	19.1	0.1
10/1993	28.0	0.2	4/2020	37.7	16.1
11/1993	28.2	0.3	5/2020	31.0	10.6
12/1993	32.5	0.2	6/2020	28.5	8.4
1/1994	29.9	0.5	7/2020	28.9	8.6
2/1994	30.0	0.2	8/2020	24.3	4.3
3/1994	30.3	0.9	9/2020	24.8	4.7
4/1994	30.2	0.3	10/2020	24.2	4.2
5/1994	31.6	1.6	11/2020	22.7	2.6
6/1994	31.2	1.7	12/2020	23.1	3.2
7/1994	31.2	1.5	1/2021	36.9	14.0
8/1994	31.2	1.5	2/2021	25.8	4.2
9/1994	31.6	2.2	3/21	54.5	29.7
10/1994	32.8	3.7	4/21	31.0	-4.8
11/1994	32.6	3.4	5/21	27.4	-2.7

RDPI: Real Disposable Personal Income; RDPI-PC, Real Disposable Personal Income Per Capita

Source: US Bureau of Economic Analysis https://apps.bea.gov/iTable/index_nipa.cfm

National Bureau of Economic Research

https://www.nber.org/cycles.html

Chart IB-13 provides monthly real disposable personal income per capita from 2007 to 2021. There was initial recovery from the drop during the global recession followed by relative cyclical weakness. There is increase of 0.5 percent in Sep 2020 followed by decrease of 0.4 percent in Oct 2020, contraction of 1.2 percent in Nov 2020, increase of 0.3 percent in Dec 2020, increase of 11.2 percent in Jan 2021, decrease of 8.1 percent in Feb 2020, increase of 22.8 percent in Mar 2021, decrease of 15.1 percent in Apr 2021 and decrease of 2.8 percent in May 2021 with government transfers of social benefits in the lockdown of economic activity in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event, followed by sharp increase in Apr 2020. The BEA explains as follows (https://www.bea.gov/sites/default/files/2020-11/pi1020.pdf): “The decrease in personal income in October was led by a decrease in government social benefits (table 3). Within government social benefits, “other” social benefits decreased which primarily reflected a decrease in Lost Wages Supplemental Payments, a Federal Emergency Management Agency program that provides wage assistance to individuals impacted by the pandemic. Offsetting the decrease in government social benefits were increases in compensation and proprietors’ income (led by farm). Within compensation, an increase in private wages and salaries was partly offset by a decrease in government wages and salaries, which decreased $8.4 billion in October, following a decrease of $8.2 billion in September and an increase of $22.8 billion in August. Temporary and intermittent decennial Census workers boosted government wages by $3.7 billion in October after adding $9.3 billion in September and $10.9 billion in August. Within farm proprietors’ income, there was an increase in payments under the Coronavirus Food Assistance Program related to supporting farmers and ranchers impacted by COVID-19.” There is further explanation (https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf https://www.bea.gov/sites/default/files/2021-01/pi1220.pdf https://www.bea.gov/sites/default/files/2021-02/pi0121.pdf https://www.bea.gov/sites/default/files/2021-03/pi0221.pdf https://www.bea.gov/sites/default/files/2021-04/pi0321.pdf https://www.bea.gov/sites/default/files/2021-05/pi0421.pdf https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf).

Chart IB-13, US, Real Disposable Per Capita Income, Monthly, Seasonally Adjusted at Annual Rates, Chained 2012 Dollars 2007-2021

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Table IB-6 provides data for analysis of the current cycle. Real disposable income (RDPI) increased 31.4 percent from Dec 2007 to Feb 2020 (column RDPI ∆% 12/07). In the same period, real disposable income per capita increased 20.8 percent (column RDPI-PC ∆% 12/07). The annual equivalent rate of increase of real disposable income per capita is 1.6 percent, only a fraction of 2.0 percent on average from 1929 to 2019, and 2.3 percent for real disposable income, much lower than 3.2 percent on average from 1929 to 2019. Real disposable income (RDPI) increased 39.2 percent from Dec 2007 to May 2021 (column RDPI ∆% 12/07). In the same period, real disposable income per capita increased 27.4 percent (column RDPI-PC ∆% 12/07). Contraction of real disposable income of 8.1 percent in Feb 2021 and contraction of 8.1 percent of real disposable income per capita occur during government social transfers in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event. The BEA explains as follows (https://www.bea.gov/sites/default/files/2020-11/pi1020.pdf): “The decrease in personal income in October was led by a decrease in government social benefits (table 3). Within government social benefits, “other” social benefits decreased which primarily reflected a decrease in Lost Wages Supplemental Payments, a Federal Emergency Management Agency program that provides wage assistance to individuals impacted by the pandemic. Offsetting the decrease in government social benefits were increases in compensation and proprietors’ income (led by farm). Within compensation, an increase in private wages and salaries was partly offset

by a decrease in government wages and salaries, which decreased $8.4 billion in October, following a decrease of $8.2 billion in September and an increase of $22.8 billion in August. Temporary and intermittent decennial Census workers boosted government wages by $3.7 billion in October after adding $9.3 billion in September and $10.9 billion in August. Within farm proprietors’ income, there was an increase in payments under the Coronavirus Food Assistance Program related to supporting farmers and ranchers impacted by COVID-19.” There is further explanation (https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf https://www.bea.gov/sites/default/files/2021-01/pi1220.pdf https://www.bea.gov/sites/default/files/2021-02/pi0121.pdf https://www.bea.gov/sites/default/files/2021-03/pi0221.pdf https://www.bea.gov/sites/default/files/2021-04/pi0321.pdf https://www.bea.gov/sites/default/files/2021-05/pi0421.pdf https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf).

Table IB-6, Percentage Changes of Real Disposable Personal Income and Real Disposable Personal Income Per Capita

Month	RDPI ∆% 12/07	RDPI ∆% Month	RDPI ∆% YOY	RDPI-PC ∆% 12/07	RDPI-PC ∆% Month	RDPI-PC ∆% YOY
6/09	0.7	-1.7	-0.9	-0.6	-1.7	-1.8
9/09	0.2	0.2	0.4	-1.4	0.1	-0.5
6/10	2.7	0.2	2.0	0.5	0.1	1.2
12/10	4.2	0.7	3.6	1.6	0.6	2.8
6/11	4.8	0.5	2.0	1.8	0.4	1.2
12/11	5.9	0.9	1.6	2.5	0.8	0.9
6/12	8.3	0.1	3.4	4.5	0.0	2.6
10/12	8.4	0.8	3.3	4.4	0.7	2.6
11/12	10.0	1.4	4.8	5.8	1.4	4.1
12/12	12.8	2.5	6.5	8.4	2.5	5.8
6/13	7.0	0.1	-1.2	2.6	0.0	-1.8
12/13	8.0	0.3	-4.2	3.1	0.3	-4.9
1/14	8.5	0.5	2.1	3.5	0.4	1.4
2/14	9.2	0.6	3.2	4.1	0.6	2.5
3/14	9.8	0.5	3.7	4.6	0.5	2.9
4/14	10.2	0.4	3.6	5.0	0.3	2.9
5/14	10.6	0.4	3.4	5.3	0.3	2.7
6/14	11.1	0.5	3.8	5.7	0.4	3.1
7/14	11.5	0.3	4.2	6.0	0.2	3.5
8/14	12.0	0.5	4.5	6.4	0.4	3.8
9/14	12.3	0.3	4.4	6.7	0.2	3.6
10/14	12.8	0.4	5.1	7.1	0.4	4.4
11/14	13.4	0.5	5.3	7.5	0.4	4.5
12/14	14.1	0.6	5.6	8.1	0.6	4.9
12/15	17.2	0.5	2.8	10.3	0.4	2.1
12/16	19.2	0.2	1.7	11.4	0.1	1.0
12/17	23.3	0.2	3.4	14.6	0.1	2.8
12/18	28.6	1.0	4.3	18.9	1.0	3.8
1/19	28.6	0.0	3.5	18.9	0.0	3.0
2/19	28.8	0.2	3.4	19.0	0.1	2.9
3/19	28.7	-0.1	2.9	18.9	-0.1	2.4
04/19	28.4	-0.3	2.4	18.6	-0.3	1.9
05/19	28.3	-0.1	2.0	18.5	-0.1	1.6
06/19	28.5	0.1	1.9	18.5	0.1	1.4
07/19	28.6	0.1	1.6	18.6	0.0	1.1
08/19	29.2	0.5	1.8	19.1	0.4	1.3
09/19	29.4	0.1	2.0	19.2	0.1	1.5
10/19	29.4	0.0	1.8	19.2	0.0	1.3
11/19	29.9	0.4	2.1	19.6	0.4	1.6
12/19	29.6	-0.2	0.8	19.2	-0.3	0.3
01/20	30.6	0.7	1.5	20.1	0.7	1.1
02/20	31.4	0.6	2.0	20.8	0.6	1.5
03/20	29.5	-1.4	0.6	19.1	-1.4	0.1
04/20	49.8	15.6	16.7	37.7	15.6	16.1
05/20	42.6	-4.8	11.1	31.0	-4.9	10.6
06/20	39.9	-1.8	8.9	28.5	-1.9	8.4
07/20	40.4	0.3	9.2	28.9	0.3	8.6
08/20	35.5	-3.5	4.9	24.3	-3.6	4.3
09/20	36.2	0.5	5.2	24.8	0.5	4.7
10/20	35.6	-0.4	4.8	24.2	-0.5	4.2
11/20	34.0	-1.2	3.1	22.7	-1.2	2.6
12/20	34.4	0.3	3.7	23.1	0.3	3.2
01/21	49.5	11.2	14.5	36.9	11.2	14.0
02/21	37.4	-8.1	4.6	25.8	-8.1	4.2
03/21	68.7	22.8	30.3	54.5	22.7	29.7
04/21	43.2	-15.1	-4.4	31.0	-15.2	-4.8
05/21	39.2	-2.8	-2.3	27.4	-2.8	-2.7

RDPI: Real Disposable Personal Income; RDPI-PC, Real Disposable Personal Income Per Capita

Source: US Bureau of Economic Analysis https://apps.bea.gov/iTable/index_nipa.cfm

National Bureau of Economic Research

https://www.nber.org/cycles.html

IA2 Financial Repression. McKinnon (1973) and Shaw (1974) argue that legal restrictions on financial institutions can be detrimental to economic development. “Financial repression” is the term used in the economic literature for these restrictions (see Pelaez and Pelaez, Globalization and the State, Vol. II (2008b), 81-6; for historical analysis see the landmark exhaustive research by Summerhill (2015) and earlier research by Pelaez (1975)). Theory and evidence support the role of financial institutions in efficiency and growth (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 22-6, Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 37-44). Excessive official regulation frustrates financial development required for growth (Haber 2011). Emphasis on disclosure can reduce bank fragility and corruption, empowering investors to enforce sound governance (Barth, Caprio and Levine 2006). Banking was important in facilitating economic growth in historical periods (Cameron 1961, 1967, 1972; Cameron et al. 1992). Banking is also important currently because small- and medium-size business may have no other form of financing than banks in contrast with many options for larger and more mature companies that have access to capital markets. Calomiris and Haber (2014) find that broad voting rights and institutions restricting coalitions of bankers and populists ensure stable banking systems and access to credit. Summerhill (2015) contributes momentous solid facts and analysis with an ideal method combining economic theory, econometrics, international comparisons, data reconstruction and exhaustive archival research. Summerhill (2015) finds that Brazil committed to service of sovereign foreign and internal debt. Contrary to conventional wisdom, Brazil generated primary fiscal surpluses during most of the Empire until 1889 (Summerhill 2015, 37-8, Figure 2.1). Econometric tests by Summerhill (2015, 19-44) show that Brazil’s sovereign debt was sustainable. Sovereign credibility in the North-Weingast (1989) sense spread to financial development that provided the capital for modernization in England and parts of Europe (see Cameron 1961, 1967). Summerhill (2015, 3,194-6, Figure 7.1) finds that “Brazil’s annual cost of capital in London fell from a peak of 13.9 percent in 1829 to only 5.12 percent in 1889. Average rates on secured loans in the private sector in Rio, however, remained well above 12 percent through 1850.” Financial development would have financed diversification of economic activities, increasing productivity and wages and ensuring economic growth. Brazil restricted creation of limited liability enterprises (Summerhill 2015, 151-82) that prevented raising capital with issue of stocks and corporate bonds. Cameron (1961) analyzed how the industrial revolution in England spread to France and then to the rest of Europe. The Société Générale de Crédit Mobilier of Émile and Isaac Péreire provided the “mobilization of credit” for the new economic activities (Cameron 1961). Summerhill (2015, 151-9) provides facts and analysis demonstrating that regulation prevented the creation of a similar vehicle for financing modernization by Irineu Evangelista de Souza, the legendary Visconde de Mauá. Regulation also prevented the use of negotiable bearing notes of the Caisse Générale of Jacques Lafitte (Cameron 1961, 118-9). The government also restricted establishment and independent operation of banks (Summerhill 2015, 183-214). Summerhill (2015, 198-9) measures concentration in banking that provided economic rents or a social loss. The facts and analysis of Summerhill (2015) provide convincing evidence in support of the economic theory of regulation, which postulates that regulated entities capture the process of regulation to promote their self-interest. There appears to be a case that excessively centralized government can result in regulation favoring private instead of public interests with adverse effects on economic activity. The contribution of Summerhill (2015) explains why Brazil did not benefit from trade as an engine of growth—as did regions of recent settlement in the vision of nineteenth-century trade and development of Ragnar Nurkse (1959)—partly because of restrictions on financing and incorporation. Interest rate ceilings on deposits and loans have been commonly used. Professor Rondo E. Cameron, in his memorable A Concise Economic History of the World (Cameron 1989, 307-8), finds that “from a broad spectrum of possible forms of interaction between the financial sector and other sectors of the economy that requires its services, one can isolate three type-cases: (1) that in which the financial sector plays a positive, growth-inducing role; (2) that in which the financial sector is essentially neutral or merely permissive; and (3) that in which inadequate finance restricts or hinders industrial and commercial development.” Summerhill (1985) proves exhaustively that Brazil failed to modernize earlier because of the restrictions of an inadequate institutional financial arrangement plagued by regulatory capture for self-interest. The Banking Act of 1933 imposed prohibition of payment of interest on demand deposits and ceilings on interest rates on time deposits. These measures were justified by arguments that the banking panic of the 1930s was caused by competitive rates on bank deposits that led banks to engage in high-risk loans (Friedman, 1970, 18; see Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 74-5). The objective of policy was to prevent unsound loans in banks. Savings and loan institutions complained of unfair competition from commercial banks that led to continuing controls with the objective of directing savings toward residential construction. Friedman (1970, 15) argues that controls were passive during periods when rates implied on demand deposit were zero or lower and when Regulation Q ceilings on time deposits were above market rates on time deposits. The Great Inflation or stagflation of the 1960s and 1970s changed the relevance of Regulation Q.

Most regulatory actions trigger compensatory measures by the private sector that result in outcomes that are different from those intended by regulation (Kydland and Prescott 1977). Banks offered services to their customers and loans at rates lower than market rates to compensate for the prohibition to pay interest on demand deposits (Friedman 1970, 24). The prohibition of interest on demand deposits was eventually lifted in recent times. In the second half of the 1960s, already in the beginning of the Great Inflation (DeLong 1997), market rates rose above the ceilings of Regulation Q because of higher inflation. Nobody desires savings allocated to time or savings deposits that pay less than expected inflation. This is a fact currently with near zero nominal interest rates, 0 to ¼ percent, and consumer price inflation of 5.0 percent in the 12 months ending in May 2021 (https://www.bls.gov/cpi/) but rising during waves of carry trades from zero interest rates to commodity futures exposures (https://cmpassocregulationblog.blogspot.com/2021/06/us-gdp-growing-continuing-recovery-in.html and earlier https://cmpassocregulationblog.blogspot.com/2021/05/us-gdp-growing-at-saar-64-percent-in_29.html). Funding problems motivated compensatory measures by banks. Money-center banks developed the large certificate of deposit (CD) to accommodate increasing volumes of loan demand by customers. As Friedman (1970, 25) finds:

“Large negotiable CD’s were particularly hard hit by the interest rate ceiling because they are deposits of financially sophisticated individuals and institutions who have many alternatives. As already noted, they declined from a peak of $24 billion in mid-December, 1968, to less than $12 billion in early October, 1969.”

Banks created different liabilities to compensate for the decline in CDs. As Friedman (1970, 25; 1969) explains:

“The most important single replacement was almost surely ‘liabilities of US banks to foreign branches.’ Prevented from paying a market interest rate on liabilities of home offices in the United States (except to foreign official institutions that are exempt from Regulation Q), the major US banks discovered that they could do so by using the Euro-dollar market. Their European branches could accept time deposits, either on book account or as negotiable CD’s at whatever rate was required to attract them and match them on the asset side of their balance sheet with ‘due from head office.’ The head office could substitute the liability ‘due to foreign branches’ for the liability ‘due on CDs.”

Friedman (1970, 26-7) predicted the future:

“The banks have been forced into costly structural readjustments, the European banking system has been given an unnecessary competitive advantage, and London has been artificially strengthened as a financial center at the expense of New York.”

In short, Depression regulation exported the US financial system to London and offshore centers. What is vividly relevant currently from this experience is the argument by Friedman (1970, 27) that the controls affected the most people with lower incomes and wealth who were forced into accepting controlled-rates on their savings that were lower than those that would be obtained under freer markets. As Friedman (1970, 27) argues:

“These are the people who have the fewest alternative ways to invest their limited assets and are least sophisticated about the alternatives.”

Chart IB-14 of the Bureau of Economic Analysis (BEA) provides quarterly savings as percent of disposable income or the US savings rate from 1980 to 2021. There was a long-term downward sloping trend from 12 percent in the early 1980s to 2.2 percent in Jul 2005. The savings rate then rose during the contraction and in the expansion. In 2011 and into 2012 the savings rate declined as consumption is financed with savings in part because of the disincentive or frustration of receiving a few pennies for every $10,000 of deposits in a bank. The savings rate increased in the final segment of Chart IB-14 in 2012 because of the “fiscal cliff” episode followed by another decline because of the pain of the opportunity cost of zero remuneration for hard-earned savings. There are multiple recent oscillations during expectations of increase or “liftoff” of the fed funds rate in the United States followed by “shallow” or uncertain monetary policy with increase in policy interest rates and reduction of the balance sheet of the Fed. The savings rate increased in the final segment with the annual revisions of 2019 and 2020. The savings rate jumped followed by decline in the lockdown of economic activity of the COVID-19 event. The BEA explains as follows (https://www.bea.gov/sites/default/files/2020-11/pi1020.pdf): “The decrease in personal income in October was led by a decrease in government social benefits (table 3). Within government social benefits, “other” social benefits decreased which primarily reflected a decrease in Lost Wages Supplemental Payments, a Federal Emergency Management Agency program that provides wage assistance to individuals impacted by the pandemic. Offsetting the decrease in government social benefits were increases in compensation and proprietors’ income (led by farm). Within compensation, an increase in private wages and salaries was partly offset

by a decrease in government wages and salaries, which decreased $8.4 billion in October, following a decrease of $8.2 billion in September and an increase of $22.8 billion in August. Temporary and intermittent decennial Census workers boosted government wages by $3.7 billion in October after adding $9.3 billion in September and $10.9 billion in August. Within farm proprietors’ income, there was an increase in payments under the Coronavirus Food Assistance Program related to supporting farmers and ranchers impacted by COVID-19.” There is further explanation (https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf https://www.bea.gov/sites/default/files/2021-01/pi1220.pdf https://www.bea.gov/sites/default/files/2021-02/pi0121.pdf https://www.bea.gov/sites/default/files/2021-03/pi0221.pdf https://www.bea.gov/sites/default/files/2021-04/pi0321.pdf https://www.bea.gov/sites/default/files/2021-04/pi0321.pdf https://www.bea.gov/sites/default/files/2021-05/pi0421.pdf https://www.bea.gov/sites/default/files/2021-06/pi0521.pdf).

Chart IB-14, US, Personal Savings as a Percentage of Disposable Personal Income, Quarterly, 1980-2021

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-14A provides the US personal savings rate, or personal savings as percent of disposable personal income, on an annual basis from 1929 to 2020. The US savings rate shows decline from around 10 percent in the 1960s to around 8 percent currently. There is sharp increase in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event.

Chart IB-14A, US, Personal Savings as a Percentage of Disposable Personal Income, Annual, 1929-2020

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Table IB-7 provides personal savings as percent of disposable income and annual change of real disposable personal income in selected years since 1930. Savings fell from 4.5 percent of disposable personal income in 1930 to minus 0.7 percent in 1933 while real disposable income contracted 6.3 percent in 1930 and 2.9 percent in 1933. Savings as percent of disposable personal income swelled during World War II to 27.9 percent in 1944 with increase of real disposable income of 3.1 percent. Savings as percent of personal disposable income fell steadily over decades from 12.0 percent in 1982 to 3.1 percent in 2005. Savings as percent of disposable personal income was 6.4 percent in 2013 while real disposable income fell 1.3 percent. The savings rate was 7.4 percent of GDP in 2014 with growth of real disposable income of 4.1 percent. The savings rate was 7.5 percent in 2015 with growth of real disposable income at 4.2 percent. The savings rate stood at 6.9 percent in 2016 with growth of real disposable income at 2.0 percent. The savings rate reached 7.2 percent in 2017 with growth of real disposable income at 3.1 percent. The savings rate stood at 7.8 percent in 2018 with growth of real disposable income at 3.6 percent. The savings rate stood at 7.5 percent in 2019 with growth of real disposable income at 2.2 percent. The savings rate jumped to 16.4 percent in 2020 with growth of real disposable income of 5.9 percent in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event.

Table IB-7, US, Personal Savings as Percent of Disposable Personal Income, Annual, Selected Years 1929-2019

	Personal Savings as Percent of Disposable Personal Income	Annual Change of Real Disposable Personal Income
1930	4.5	-6.3
1933	-0.7	-2.9
1944	27.9	3.1
1947	6.3	-4.1
1954	10.3	1.4
1958	11.4	1.0
1960	10.1	2.6
1970	12.8	4.6
1975	13.4	2.5
1982	12.0	2.2
1989	8.4	2.9
1993	7.9	1.7
2002	5.8	3.0
2003	5.5	2.7
2004	5.1	3.3
2005	3.1	1.6
2006	3.8	4.0
2007	3.7	2.3
2008	5.0	1.0
2009	6.1	-0.2
2010	6.5	2.0
2011	7.2	2.3
2012	8.9	3.3
2013	6.4	-1.3
2014	7.4	4.1
2015	7.5	4.2
2016	6.9	2.0
2017	7.2	3.1
2018	7.8	3.6
2019	7.5	2.2
2020	16.4	5.9
Average Savings Ratio
1980-1989	9.9
2007-2019	6.2
Average Yearly ∆% Real Disposable Income
1980-1989		3.1
2007-2019		2.4

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-15 of the US Bureau of Economic Analysis provides personal savings as percent of personal disposable income, or savings ratio, from Jan 2007 to May 2021. The savings rate jumped to 12.9 percent in Mar 2020 and 33.7 percent in Apr 2020, decreasing to 24.7 percent in May 2020, 19.0 percent in Jun 2020, 18.4 percent in Jul 2020, 14.6 percent in Aug 2020, 14.1 percent in Sep 2020, 13.5 percent in Oct 2020, 13.1 percent in Nov 2020, 14.2 in Dec 2020, 20.7 in Jan 2021, 14.8 percent in Feb 2021, 27.6 percent in Mar 2021, 14.5 percent in Apr 2021 and 12.4 in May 2021 during government social transfers in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event. The BEA explains as follows (https://www.bea.gov/sites/default/files/2020-11/pi1020.pdf): “The decrease in personal income in October was led by a decrease in government social benefits (table 3). Within government social benefits, “other” social benefits decreased which primarily reflected a decrease in Lost Wages Supplemental Payments, a Federal Emergency Management Agency program that provides wage assistance to individuals impacted by the pandemic. Offsetting the decrease in government social benefits were increases in compensation and proprietors’ income (led by farm). Within compensation, an increase in private wages and salaries was partly offset

Chart IB-15, US, Personal Savings as a Percentage of Disposable Income, Monthly 2007-2021

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

The uncertainties caused by the global recession resulted in sharp increase in the savings ratio that peaked at 7.8 percent in May 2008 (https://apps.bea.gov/iTable/index_nipa.cfm), as shown in Table IB-8. The second peak occurred at 8.2 percent in May 2009. There was another rising trend until 6.9 percent in Jun 2010 and then steady downward trend until 6.9 percent in Nov 2011. This was followed by an upward trend with 9.1 percent in Jun 2012 but decline to 7.9 percent in Aug 2012 followed by jump to 12.0 percent in Dec 2012. Swelling realization of income in Oct-Dec 2012 in anticipation of tax increases in Jan 2013 caused the jump of the savings rate to 12.0 percent in Dec 2012. The BEA explains as “Personal income in November and December was boosted by accelerated and special dividend payments to persons and by accelerated bonus payments and other irregular pay in private wages and salaries in anticipation of changes in individual income tax rates. Personal income in December was also boosted by lump-sum social security benefit payments” (page 2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi1212.pdf). There was a reverse effect in Jan 2013 with decline of the savings rate to 6.3 percent. Real disposable personal income fell 5.8 percent and real disposable per capita income fell from $41,281 in Dec 2012 to $38,886 in Jan 2013 or by 5.8 percent (http://www.bea.gov/iTable/index_nipa.cfm), which is explained by the Bureau of Economic Analysis as follows (page 3 http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0213.pdf):

“Contributions for government social insurance -- a subtraction in calculating personal income --increased $6.4 billion in February, compared with an increase of $126.8 billion in January. The

January estimate reflected increases in both employer and employee contributions for government social insurance. The January estimate of employee contributions for government social insurance reflected the expiration of the “payroll tax holiday,” that increased the social security contribution rate for employees and self-employed workers by 2.0 percentage points, or $114.1 billion at an annual rate. For additional information, see FAQ on “How did the expiration of the payroll tax holiday affect personal income for January 2013?” at www.bea.gov. The January estimate of employee contributions for government social insurance also reflected an increase in the monthly premiums paid by participants in the supplementary medical insurance program, in the hospital insurance provisions of the Patient Protection and Affordable Care Act, and in the social security taxable wage base; together, these changes added $12.9 billion to January. Employer contributions were boosted $5.9 billion in January, which reflected increases in the social security taxable wage base (from $110,100 to $113,700), in the tax rates paid by employers to state unemployment insurance, and in employer contributions for the federal unemployment tax and for pension guaranty. The total contribution of special factors to the January change in contributions for government social insurance was $132.9 billion.”

Table IB-8, US, Savings Ratio and Real Disposable Income, % and ∆%

	Personal Saving as % Disposable Income	RDPI ∆% 12/07	RDPI ∆% Month	RDPI ∆% YOY
May 2008	7.8	4.4	4.8	4.8
May 2009	8.2	2.4	1.7	-1.9
Jun 2010	6.9	2.7	0.2	2.0
Nov 2011	6.9	4.9	0.0	1.4
Jun 2012	9.1	8.3	0.1	3.4
Aug 2012	7.9	7.1	-0.4	2.1
Dec 2012	12.0	12.8	2.5	6.5
Jan 2013	6.3	6.3	-5.8	-0.4
Feb 2013	5.8	5.7	-0.5	-1.5
Mar 2013	5.9	5.9	0.2	-1.7
Apr 2013	6.4	6.3	0.4	-1.6
May 2013	6.7	6.9	0.6	-1.2
Jun 2013	6.8	7.0	0.1	-1.2
Jul 2013	6.6	6.9	-0.1	-0.6
Aug 2013	6.7	7.2	0.2	0.1
Sep 2013	6.8	7.6	0.4	0.0
Oct 2013	6.2	7.3	-0.3	-1.0
Nov 2013	6.1	7.7	0.3	-2.1
Dec 2013	6.4	8.0	0.3	-4.2
Dec 2014	7.7	14.1	0.6	5.6
Dec 2015	7.3	17.2	0.5	2.8
Dec 2016	6.4	19.2	0.2	1.7
Dec 2017	6.6	23.3	0.2	3.4
Dec 2018	9.1	28.6	1.0	4.3
Dec 2019	7.2	29.6	-0.2	0.8
Jan 2020	7.6	30.6	0.7	1.5
Feb 2020	8.3	31.4	0.6	2.0
Mar 2020	12.9	29.5	-1.4	0.6
Apr 2020	33.7	49.8	15.6	16.7
May 2020	24.7	42.6	-4.8	11.1
Jun 2020	19.0	39.9	-1.8	8.9
Jul 2020	18.4	40.4	0.3	9.2
Aug 2020	14.6	35.5	-3.5	4.9
Sep 2020	14.1	36.2	0.5	5.2
Oct 2020	13.5	35.6	-0.4	4.8
Nov 2020	13.1	34.0	-1.2	3.1
Dec 2020	14.2	34.4	0.3	3.7
Jan 2021	20.7	49.5	11.2	14.5
Feb 2021	14.8	37.4	-8.1	4.6
Mar 2021	27.6	68.7	22.8	30.3
Apr 2021	14.5	43.2	-15.1	-4.4
May 2021	12.4	39.2	-2.8	-2.3

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

IIB2 United States House Prices. The Federal Housing Finance Agency (FHFA), which regulates Fannie Mae and Freddie Mac, provides the FHFA House Price Index (HPI) that “is calculated using home sales price information from Fannie Mae and Freddie Mac-acquired mortgages” (http://fhfa.gov/webfiles/24216/q22012hpi.pdf 1). The Federal Housing Finance Agency (FHFA), which regulates Fannie Mae and Freddie Mac, provides the FHFA House Price Index (HPI) that “is calculated using home sales price information from Fannie Mae and Freddie Mac-acquired mortgages” (http://fhfa.gov/webfiles/24216/q22012hpi.pdf 1). Table IIA2-1 provides the FHFA HPI for purchases only, which shows behavior similar to that of the Case-Shiller index but with lower magnitudes. House prices catapulted from 2000 to 2003, 2005 and 2006. From IVQ2000 to IVQ2006, the index for the US as a whole rose 55.0 percent, with 62.1 percent for New England, 72.0 percent for Middle Atlantic, 71.2 percent for South Atlantic but only by 33.1 percent for East South Central. Prices fell relative to 2014 for the US and all regions from 2006 with exception of increase of 2.6 percent for East South Central. Prices for the US increased 4.9 percent in IVQ2014 relative to IVQ2013 and 12.9 percent from IVQ2012 to IVQ2014. From IVQ2000 to IVQ2014, prices rose for the US and the four regions in Table IIA2-1.

Table IIA2-1, US, FHFA House Price Index Purchases Only NSA ∆%

	United States	New England	Middle Atlantic	South Atlantic	East South Central
IVQ2000 to IVQ2003	24.0	40.6	35.8	25.9	11.0
IVQ2000 to IVQ2005	50.5	65.0	67.6	62.9	25.4
IVQ2000 to IVQ2006	55.0	62.1	72.0	71.2	33.1
IVQ2005 to IVQ2014	-1.5	-8.7	-2.3	-7.4	8.9
IVQ2006 to IVQ2014	-4.4	-7.1	-4.8	-11.9	2.6
IVQ2007 to IVQ2014	-1.9	-5.1	-5.0	-8.6	0.7
IVQ2011 to IVQ2014	18.9	7.3	6.9	19.9	11.8
IVQ2012 to IVQ2014	12.9	6.8	5.7	13.8	8.6
IVQ2013 to IVQ2014	4.9	2.5	2.2	5.1	4.2
IVQ2000 to IVQ2014	48.3 144.27	50.6 138.40	63.7 127.30	50.9 140.28	36.6 146.07

Source: Federal Housing Finance Agency

http://www.fhfa.gov/KeyTopics/Pages/House-Price-Index.aspx

Data of the FHFA HPI for the remaining US regions are in Table IIA2-2. Behavior is not very different from that in Table IIA2-1 with the exception of East North Central. House prices in the Pacific region doubled between 2000 and 2006. Although prices of houses declined sharply from 2005 and 2006 to 2014 with exception of West South Central and West North Central, there was still appreciation relative to 2000.

Table IIA2-2, US, FHFA House Price Index Purchases Only NSA ∆%

	West South Central	West North Central	East North Central	Mountain	Pacific
IVQ2000 to IVQ2003	11.1	18.3	14.7	18.9	44.6
IVQ2000 to IVQ2005	23.9	31.0	23.8	58.0	107.7
IVQ2000 to IVQ2006	31.6	33.7	23.7	68.6	108.7
IVQ2005 to IVQ2014	26.6	4.7	-5.4	-2.6	-14.7
IVQ2006 to IVQ2014	19.1	2.6	-5.4	-8.7	-15.1
IVQ2007 to IVQ2014	15.2	3.2	-2.1	-5.6	-6.0
IVQ2011 to IVQ2014	18.1	13.5	14.2	32.9	37.6
IVQ2012 to IVQ2014	12.1	8.9	11.1	17.9	24.4
IVQ2013 to IVQ2014	5.9	4.0	4.6	5.5	7.3
IVQ2000 to IVQ2014	56.8 145.53	37.1 158.59	17.1 155.13	53.9 172.46	77.1 132.21

Source: Federal Housing Finance Agency

http://www.fhfa.gov/KeyTopics/Pages/House-Price-Index.aspx

Monthly and 12-month percentage changes of the FHFA House Price Index are in Table IIA2-3. Percentage monthly increases of the FHFA index were positive from Apr to Jul 2011 with exception of declines in May and Aug 2011 while 12-month percentage changes improved steadily from around minus 6.0 percent in Mar to May 2011 to minus 4.6 percent in Jun 2011. The house price index increased 0.5 percent in Jan 2019 and increased 5.4 percent in 12 months. House prices increased 0.4 percent in Feb 2019 and increased 5.1 percent in 12 months. The house price index increased 0.2 percent in Mar 2019 and increased 5.0 percent in 12 months. House prices increased 0.6 percent in Apr 2019 and increased 5.3 percent in 12 months. The house price index increased 0.6 percent in May 2019 and increased 5.2 percent in 12 months. House prices increased 0.3 percent in Jun 2019 and increased 4.9 percent in 12 months. The house price index increased 0.5 percent in Jul 2019 and increased 5.0 percent in 12 months. House prices increased 0.1 percent in Aug 2019 and increased 4.7 percent in 12 months. The house price index increased 0.7 percent in Sep 2019 and increased 5.4 percent in 12 months. House prices increased 0.5 percent in Oct 2019 and increased 5.5 percent in 12 months. The house price index increased 0.4 percent in Nov 2019 and increased 5.3 percent in 12 months. House prices increased 0.9 percent in Dec 2019 and increased 5.9 percent in 12 months. The house price index increased 0.6 percent in Jan 2020 and increased 6.0 percent in 12 months. House prices increased 0.8 percent in Feb 2020 and increased 6.4 percent in 12 months. The house price index increased 0.2 percent in Mar 2020 and increased 6.4 percent in 12 months. House prices increased 0.3 percent in Apr 2020 and increased 6.0 percent in 12 months. The house price index changed 0.0 percent in May 2020 and increased 5.2 percent in 12 months. House prices increased 1.1 percent in Jun 2020 and increased 6.1 percent in 12 months. The house price index increased 1.2 percent in Jul 2020 and increased 6.8 percent in 12 months. House prices increased 1.6 percent in Aug 2020 and increased 8.4 percent in 12 months. The house price index increased 1.6 percent in Sep 2020 and increased 9.4 percent in 12 months. House prices increased 1.4 percent in Oct 2020 and increased 10.4 percent in 12 months. The house price index increased 1.1 percent in Nov 2020 and increased 11.2 percent in 12 months. House prices increased 1.2 percent in Dec 2020 and increased 11.5 percent in 12 months. The house price index increased 1.1 percent in Jan 2021 and increased 12.1 percent in 12 months. House prices increased 1.1 percent in Feb 2021 and increased 12.5 percent in 12 months. The house price index increased 1.6 percent in Mar 2021 and increased 14.0 percent in 12 months. House prices increased 1.8 percent in Apr 2021 and increased 15.7 percent in 12 months.

Table IIA2-3, US, FHFA House Price Index Purchases Only SA. Month and NSA 12-Month ∆%

	Month ∆% SA	12-Month ∆% NSA
4/1/2021	1.8	15.7
3/1/2021	1.6	14.0
2/1/2021	1.1	12.5
1/1/2021	1.1	12.1
12/1/2020	1.2	11.5
11/1/2020	1.1	11.2
10/1/2020	1.4	10.4
9/1/2020	1.6	9.4
8/1/2020	1.6	8.4
7/1/2020	1.2	6.8
6/1/2020	1.1	6.1
5/1/2020	0.0	5.2
4/1/2020	0.3	6.0
3/1/2020	0.2	6.4
2/1/2020	0.8	6.4
1/1/2020	0.6	6.0
12/1/2019	0.9	5.9
11/1/2019	0.4	5.3
10/1/2019	0.5	5.5
9/1/2019	0.7	5.4
8/1/2019	0.1	4.7
7/1/2019	0.5	5.0
6/1/2019	0.3	4.9
5/1/2019	0.6	5.2
4/1/2019	0.6	5.3
3/1/2019	0.2	5.0
2/1/2019	0.4	5.1
1/1/2019	0.5	5.4
12/1/2018	0.3	5.7
11/1/2018	0.5	5.8
10/1/2018	0.4	5.9
9/1/2018	0.1	5.9
8/1/2018	0.5	6.1
7/1/2018	0.4	6.2
6/1/2018	0.4	6.4
5/1/2018	0.7	6.5
4/1/2018	0.3	6.4
3/1/2018	0.3	6.9
2/1/2018	0.8	7.4
1/1/2018	0.8	7.2
12/1/2017	0.4	6.3
11/1/2017	0.6	6.4
10/1/2017	0.5	6.3
9/1/2017	0.4	6.3
8/1/2017	0.7	6.5
7/1/2017	0.6	6.1
6/1/2017	0.4	6.1
5/1/2017	0.5	6.4
4/1/2017	0.8	6.5
3/1/2017	0.7	6.2
2/1/2017	0.6	6.4
1/1/2017	-0.1	5.8
12/1/2016	0.6	6.2
11/1/2016	0.5	6.0
10/1/2016	0.5	6.0
9/1/2016	0.6	6.0
8/1/2016	0.4	5.9
7/1/2016	0.5	5.6
6/1/2016	0.5	5.5
5/1/2016	0.5	5.5
4/1/2016	0.4	5.8
3/1/2016	0.8	5.7
2/1/2016	0.1	5.2
1/1/2016	0.4	5.9
12/1/2015	0.4	5.4
11/1/2015	0.5	5.6
10/1/2015	0.5	5.5
9/1/2015	0.6	5.6
8/1/2015	0.2	5.1
7/1/2015	0.5	5.3
6/1/2015	0.4	5.2
5/1/2015	0.6	5.4
4/1/2015	0.3	5.1
3/1/2015	0.3	5.1
2/1/2015	0.8	5.1
1/1/2015	0.1	4.6
12/1/2014	0.7	4.9
11/1/2014	0.5	4.7
10/1/2014	0.6	4.3
9/1/2014	0.1	4.1
8/1/2014	0.4	4.4
7/1/2014	0.4	4.4
6/1/2014	0.6	4.7
5/1/2014	0.2	4.7
4/1/2014	0.3	5.4
3/1/2014	0.3	5.7
2/1/2014	0.4	6.3
1/1/2014	0.4	6.5
12/1/2013	0.6	6.8
11/1/2013	0.1	6.7
10/1/2013	0.3	7.1
9/1/2013	0.5	7.4
8/1/2013	0.3	7.3
7/1/2013	0.6	7.7
6/1/2013	0.6	7.3
5/1/2013	0.8	7.1
4/1/2013	0.5	6.9
3/1/2013	1.0	7.0
2/1/2013	0.6	6.6
1/1/2013	0.8	6.2
12/1/2012	0.5	5.0
11/1/2012	0.4	4.8
10/1/2012	0.5	4.8
9/1/2012	0.4	3.7
8/1/2012	0.6	4.0
7/1/2012	0.2	3.1
6/1/2012	0.4	3.1
5/1/2012	0.6	3.0
4/1/2012	0.5	2.1
3/1/2012	0.9	1.8
2/1/2012	0.2	-0.3
1/1/2012	-0.4	-1.4
12/1/2011	0.3	-1.5
11/1/2011	0.5	-2.6
10/1/2011	-0.6	-3.3
9/1/2011	0.6	-2.5
8/1/2011	-0.3	-4.0
7/1/2011	0.2	-3.8
6/1/2011	0.3	-4.6
5/1/2011	-0.2	-5.9
4/1/2011	0.2	-5.8
3/1/2011	-1.1	-5.9
2/1/2011	-0.9	-5.1
1/1/2011	-0.6	-4.5
12/1/2010	-0.7	-3.9
12/1/2009	-1.0	-2.0
12/1/2008	-0.3	-10.4
12/1/2007	-0.5	-3.4
12/1/2006	0.0	2.3
12/1/2005	0.6	9.8
12/1/2004	0.9	10.2
12/1/2003	0.8	8.0
12/1/2002	0.7	7.8
12/1/2001	0.6	6.7
12/1/2000	0.6	7.1
12/1/1999	0.5	6.1
12/1/1998	0.5	5.9
12/1/1997	0.3	3.3
12/1/1996	0.3	2.7
12/1/1995	0.4	3.0
12/1/1994	0.0	2.5
12/1/1993	0.5	3.1
12/1/1992	-0.1	2.3

Source: Federal Housing Finance Agency

https://www.fhfa.gov/DataTools

The bottom part of Table IIA2-3 provides 12-month percentage changes of the FHFA house price index since 1992 when data become available for 1991. Table IIA2-4 provides percentage changes and average rates of percent change per year for various periods. Between 1992 and 2019, the FHFA house price index increased 168.6 percent at the yearly average rate of 3.7 percent. In the period 1992-2000, the FHFA house price index increased 39.0 percent at the average yearly rate of 4.2 percent. The average yearly rate of price increase accelerated to 7.5 percent in the period 2000-2003, 8.5 percent in 2000-2005 and 7.4 percent in 2000-2006. At the margin, the average rate jumped to 10.0 percent in 2003-2005 and 7.4 percent in 2003-2006. House prices measured by the FHFA house price index increased 25.7 percent at the average yearly rate of 1.8 percent between 2006 and 2019 and 28.6 percent between 2005 and 2019 at the average yearly rate of 1.8 percent. The FHFA house price index increased 11.5 percent from 2019 to 2020.

Table IIA2-4, US, FHFA House Price Index, Percentage Change and Average Rate of Percentage Change per Year, Selected Dates 1992-2020

Dec	∆%	Average ∆% per Year
1992-2019	168.6	3.7
1992-2020	199.6	4.0
1992-2000	39.0	4.2
2000-2003	24.1	7.5
2000-2005	50.2	8.5
2003-2005	21.0	10.0
2005-2019	28.6	1.8
2005-2020	43.4	2.4
2000-2006	53.6	7.4
2003-2006	23.8	7.4
2006-2019	25.7	1.8
2006-2020	40.3	2.4
2019-2020	11.5	11.5

Source: Federal Housing Finance Agency

https://www.fhfa.gov/DataTools

The explanation of the sharp contraction of household wealth can probably be found in the origins of the financial crisis and global recession. Let V(T) represent the value of the firm’s equity at time T and B stand for the promised debt of the firm to bondholders and assume that corporate management, elected by equity owners, is acting on the interests of equity owners. Robert C. Merton (1974, 453) states:

“On the maturity date T, the firm must either pay the promised payment of B to the debtholders or else the current equity will be valueless. Clearly, if at time T, V(T) > B, the firm should pay the bondholders because the value of equity will be V(T) – B > 0 whereas if they do not, the value of equity would be zero. If V(T) ≤ B, then the firm will not make the payment and default the firm to the bondholders because otherwise the equity holders would have to pay in additional money and the (formal) value of equity prior to such payments would be (V(T)- B) < 0.”

Pelaez and Pelaez (The Global Recession Risk (2007), 208-9) apply this analysis to the US housing market in 2005-2006 concluding:

“The house market [in 2006] is probably operating with low historical levels of individual equity. There is an application of structural models [Duffie and Singleton 2003] to the individual decisions on whether or not to continue paying a mortgage. The costs of sale would include realtor and legal fees. There could be a point where the expected net sale value of the real estate may be just lower than the value of the mortgage. At that point, there would be an incentive to default. The default vulnerability of securitization is unknown.”

There are multiple important determinants of the interest rate: “aggregate wealth, the distribution of wealth among investors, expected rate of return on physical investment, taxes, government policy and inflation” (Ingersoll 1987, 405). Aggregate wealth is a major driver of interest rates (Ibid, 406). Unconventional monetary policy, with zero fed funds rates and flattening of long-term yields by quantitative easing, causes uncontrollable effects on risk taking that can have profound undesirable effects on financial stability. Excessively aggressive and exotic monetary policy is the main culprit and not the inadequacy of financial management and risk controls.

The net worth of the economy depends on interest rates. In theory, “income is generally defined as the amount a consumer unit could consume (or believe that it could) while maintaining its wealth intact” (Friedman 1957, 10). Income, Y, is a flow that is obtained by applying a rate of return, r, to a stock of wealth, W, or Y = rW (Ibid). According to a subsequent restatement: “The basic idea is simply that individuals live for many years and that therefore the appropriate constraint for consumption decisions is the long-run expected yield from wealth r*W. This yield was named permanent income: Y* = r*W” (Darby 1974, 229), where * denotes permanent. The simplified relation of income and wealth can be restated as:

W = Y/r (1)

Equation (1) shows that as r goes to zero, r →0, W grows without bound, W→∞.

Lowering the interest rate near the zero bound in 2003-2004 caused the illusion of permanent increases in wealth or net worth in the balance sheets of borrowers and also of lending institutions, securitized banking and every financial institution and investor in the world. The discipline of calculating risks and returns was seriously impaired. The objective of monetary policy was to encourage borrowing, consumption and investment but the exaggerated stimulus resulted in a financial crisis of major proportions as the securitization that had worked for a long period was shocked with policy-induced excessive risk, imprudent credit, high leverage and low liquidity by the incentive to finance everything overnight at close to zero interest rates, from adjustable rate mortgages (ARMS) to asset-backed commercial paper of structured investment vehicles (SIV).

The consequences of inflating liquidity and net worth of borrowers were a global hunt for yields to protect own investments and money under management from the zero interest rates and unattractive long-term yields of Treasuries and other securities. Monetary policy distorted the calculations of risks and returns by households, business and government by providing central bank cheap money. Short-term zero interest rates encourage financing of everything with short-dated funds, explaining the SIVs created off-balance sheet to issue short-term commercial paper to purchase default-prone mortgages that were financed in overnight or short-dated sale and repurchase agreements (Pelaez and Pelaez, Financial Regulation after the Global Recession, 50-1, Regulation of Banks and Finance, 59-60, Globalization and the State Vol. I, 89-92, Globalization and the State Vol. II, 198-9, Government Intervention in Globalization, 62-3, International Financial Architecture, 144-9). ARMS were created to lower monthly mortgage payments by benefitting from lower short-dated reference rates. Financial institutions economized in liquidity that was penalized with near zero interest rates. There was no perception of risk because the monetary authority guaranteed a minimum or floor price of all assets by maintaining low interest rates forever or equivalent to writing an illusory put option on wealth. Subprime mortgages were part of the put on wealth by an illusory put on house prices. The housing subsidy of $221 billion per year created the impression of ever increasing house prices. The suspension of auctions of 30-year Treasuries was designed to increase demand for mortgage-backed securities, lowering their yield, which was equivalent to lowering the costs of housing finance and refinancing. Fannie and Freddie purchased or guaranteed $1.6 trillion of nonprime mortgages and worked with leverage of 75:1 under Congress-provided charters and lax oversight. The combination of these policies resulted in high risks because of the put option on wealth by near zero interest rates, excessive leverage because of cheap rates, low liquidity because of the penalty in the form of low interest rates and unsound credit decisions because the put option on wealth by monetary policy created the illusion that nothing could ever go wrong, causing the credit/dollar crisis and global recession (Pelaez and Pelaez, Financial Regulation after the Global Recession, 157-66, Regulation of Banks, and Finance, 217-27, International Financial Architecture, 15-18, The Global Recession Risk, 221-5, Globalization and the State Vol. II, 197-213, Government Intervention in Globalization, 182-4).

There are significant elements of the theory of bank financial fragility of Diamond and Dybvig (1983) and Diamond and Rajan (2000, 2001a, 2001b) that help to explain the financial fragility of banks during the credit/dollar crisis (see also Diamond 2007). The theory of Diamond and Dybvig (1983) as exposed by Diamond (2007) is that banks funding with demand deposits have a mismatch of liquidity (see Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 58-66). A run occurs when too many depositors attempt to withdraw cash at the same time. All that is needed is an expectation of failure of the bank. Three important functions of banks are providing evaluation, monitoring and liquidity transformation. Banks invest in human capital to evaluate projects of borrowers in deciding if they merit credit. The evaluation function reduces adverse selection or financing projects with low present value. Banks also provide important monitoring services of following the implementation of projects, avoiding moral hazard that funds be used for, say, real estate speculation instead of the original project of factory construction. The transformation function of banks involves both assets and liabilities of bank balance sheets. Banks convert an illiquid asset or loan for a project with cash flows in the distant future into a liquid liability in the form of demand deposits that can be withdrawn immediately.

In the theory of banking of Diamond and Rajan (2000, 2001a, 2001b), the bank creates liquidity by tying human assets to capital. The collection skills of the relationship banker convert an illiquid project of an entrepreneur into liquid demand deposits that are immediately available for withdrawal. The deposit/capital structure is fragile because of the threat of bank runs. In these days of online banking, the run on Washington Mutual was through withdrawals online. A bank run can be triggered by the decline of the value of bank assets below the value of demand deposits.

Pelaez and Pelaez (Regulation of Banks and Finance 2009b, 60, 64-5) find immediate application of the theories of banking of Diamond, Dybvig and Rajan to the credit/dollar crisis after 2007. It is a credit crisis because the main issue was the deterioration of the credit portfolios of securitized banks as a result of default of subprime mortgages. It is a dollar crisis because of the weakening dollar resulting from relatively low interest rate policies of the US. It caused systemic effects that converted into a global recession not only because of the huge weight of the US economy in the world economy but also because the credit crisis transferred to the UK and Europe. Management skills or human capital of banks are illustrated by the financial engineering of complex products. The increasing importance of human relative to inanimate capital (Rajan and Zingales 2000) is revolutionizing the theory of the firm (Zingales 2000) and corporate governance (Rajan and Zingales 2001). Finance is one of the most important examples of this transformation. Profits were derived from the charter in the original banking institution. Pricing and structuring financial instruments was revolutionized with option pricing formulas developed by Black and Scholes (1973) and Merton (1973, 1974, 1998) that permitted the development of complex products with fair pricing. The successful financial company must attract and retain finance professionals who have invested in human capital, which is a sunk cost to them and not of the institution where they work.

The complex financial products created for securitized banking with high investments in human capital are based on houses, which are as illiquid as the projects of entrepreneurs in the theory of banking. The liquidity fragility of the securitized bank is equivalent to that of the commercial bank in the theory of banking (Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 65). Banks created off-balance sheet structured investment vehicles (SIV) that issued commercial paper receiving AAA rating because of letters of liquidity guarantee by the banks. The commercial paper was converted into liquidity by its use as collateral in SRPs at the lowest rates and minimal haircuts because of the AAA rating of the guarantor bank. In the theory of banking, default can be triggered when the value of assets is perceived as lower than the value of the deposits. Commercial paper issued by SIVs, securitized mortgages and derivatives all obtained SRP liquidity on the basis of illiquid home mortgage loans at the bottom of the pyramid. The run on the securitized bank had a clear origin (Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 65):

“The increasing default of mortgages resulted in an increase in counterparty risk. Banks were hit by the liquidity demands of their counterparties. The liquidity shock extended to many segments of the financial markets—interbank loans, asset-backed commercial paper (ABCP), high-yield bonds and many others—when counterparties preferred lower returns of highly liquid safe havens, such as Treasury securities, than the risk of having to sell the collateral in SRPs at deep discounts or holding an illiquid asset. The price of an illiquid asset is near zero.”

Gorton and Metrick (2010H, 507) provide a revealing quote to the work in 1908 of Edwin R. A. Seligman, professor of political economy at Columbia University, founding member of the American Economic Association and one of its presidents and successful advocate of progressive income taxation. The intention of the quote is to bring forth the important argument that financial crises are explained in terms of “confidence” but as Professor Seligman states in reference to historical banking crises in the US, the important task is to explain what caused the lack of confidence. It is instructive to repeat the more extended quote of Seligman (1908, xi) on the explanations of banking crises:

“The current explanations may be divided into two categories. Of these the first includes what might be termed the superficial theories. Thus it is commonly stated that the outbreak of a crisis is due to lack of confidence,--as if the lack of confidence was not in itself the very thing which needs to be explained. Of still slighter value is the attempt to associate a crisis with some particular governmental policy, or with some action of a country’s executive. Such puerile interpretations have commonly been confined to countries like the United States, where the political passions of democracy have had the fullest way. Thus the crisis of 1893 was ascribed by the Republicans to the impending Democratic tariff of 1894; and the crisis of 1907 has by some been termed the ‘[Theodore] Roosevelt panic,” utterly oblivious of the fact that from the time of President Jackson, who was held responsible for the troubles of 1837, every successive crisis had had its presidential scapegoat, and has been followed by a political revulsion. Opposed to these popular, but wholly unfounded interpretations, is the second class of explanations, which seek to burrow beneath the surface and to discover the more occult and fundamental causes of the periodicity of crises.”

Scholars ignore superficial explanations in the effort to seek good and truth. The problem of economic analysis of the credit/dollar crisis is the lack of a structural model with which to attempt empirical determination of causes (Gorton and Metrick 2010SB). There would still be doubts even with a well-specified structural model because samples of economic events do not typically permit separating causes and effects. There is also confusion is separating the why of the crisis and how it started and propagated, all of which are extremely important.

In true heritage of the principles of Seligman (1908), Gorton (2009EFM) discovers a prime causal driver of the credit/dollar crisis. The objective of subprime and Alt-A mortgages was to facilitate loans to populations with modest means so that they could acquire a home. These borrowers would not receive credit because of (1) lack of funds for down payments; (2) low credit rating and information; (3) lack of information on income; and (4) errors or lack of other information. Subprime mortgage “engineering” was based on the belief that both lender and borrower could benefit from increases in house prices over the short run. The initial mortgage would be refinanced in two or three years depending on the increase of the price of the house. According to Gorton (2009EFM, 13, 16):

“The outstanding amounts of Subprime and Alt-A [mortgages] combined amounted to about one quarter of the $6 trillion mortgage market in 2004-2007Q1. Over the period 2000-2007, the outstanding amount of agency mortgages doubled, but subprime grew 800%! Issuance in 2005 and 2006 of Subprime and Alt-A mortgages was almost 30% of the mortgage market. Since 2000 the Subprime and Alt-A segments of the market grew at the expense of the Agency (i.e., the government sponsored entities of Fannie Mae and Freddie Mac) share, which fell from almost 80% (by outstanding or issuance) to about half by issuance and 67% by outstanding amount. The lender’s option to rollover the mortgage after an initial period is implicit in the subprime mortgage. The key design features of a subprime mortgage are: (1) it is short term, making refinancing important; (2) there is a step-up mortgage rate that applies at the end of the first period, creating a strong incentive to refinance; and (3) there is a prepayment penalty, creating an incentive not to refinance early.”

The prime objective of successive administrations in the US during the past 20 years and actually since the times of Roosevelt in the 1930s has been to provide “affordable” financing for the “American dream” of home ownership. The US housing finance system is mixed with public, public/private and purely private entities. The Federal Home Loan Bank (FHLB) system was established by Congress in 1932 that also created the Federal Housing Administration in 1934 with the objective of insuring homes against default. In 1938, the government created the Federal National Mortgage Association, or Fannie Mae, to foster a market for FHA-insured mortgages. Government-insured mortgages were transferred from Fannie Mae to the Government National Mortgage Association, or Ginnie Mae, to permit Fannie Mae to become a publicly-owned company. Securitization of mortgages began in 1970 with the government charter to the Federal Home Loan Mortgage Corporation, or Freddie Mac, with the objective of bundling mortgages created by thrift institutions that would be marketed as bonds with guarantees by Freddie Mac (see Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 42-8). In the third quarter of 2008, total mortgages in the US were $12,057 billion of which 43.5 percent, or $5423 billion, were retained or guaranteed by Fannie Mae and Freddie Mac (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 45). In 1990, Fannie Mae and Freddie Mac had a share of only 25.4 percent of total mortgages in the US. Mortgages in the US increased from $6922 billion in 2002 to $12,088 billion in 2007, or by 74.6 percent, while the retained or guaranteed portfolio of Fannie and Freddie rose from $3180 billion in 2002 to $4934 billion in 2007, or by 55.2 percent.

According to Pinto (2008) in testimony to Congress:

“There are approximately 25 million subprime and Alt-A loans outstanding, with an unpaid principal amount of over $4.5 trillion, about half of them held or guaranteed by Fannie and Freddie. Their high risk activities were allowed to operate at 75:1 leverage ratio. While they may deny it, there can be no doubt that Fannie and Freddie now own or guarantee $1.6 trillion in subprime, Alt-A and other default prone loans and securities. This comprises over 1/3 of their risk portfolios and amounts to 34% of all the subprime loans and 60% of all Alt-A loans outstanding. These 10.5 million unsustainable, nonprime loans are experiencing a default rate 8 times the level of the GSEs’ 20 million traditional quality loans. The GSEs will be responsible for a large percentage of an estimated 8.8 million foreclosures expected over the next 4 years, accounting for the failure of about 1 in 6 home mortgages. Fannie and Freddie have subprimed America.”

In perceptive analysis of growth and macroeconomics in the past six decades, Rajan (2012FA) argues that “the West can’t borrow and spend its way to recovery.” The Keynesian paradigm is not applicable in current conditions. Advanced economies in the West could be divided into those that reformed regulatory structures to encourage productivity and others that retained older structures. In the period from 1950 to 2000, Cobet and Wilson (2002) find that US productivity, measured as output/hour, grew at the average yearly rate of 2.9 percent while Japan grew at 6.3 percent and Germany at 4.7 percent (see Pelaez and Pelaez, The Global Recession Risk (2007), 135-44). In the period from 1995 to 2000, output/hour grew at the average yearly rate of 4.6 percent in the US but at lower rates of 3.9 percent in Japan and 2.6 percent in the US. Rajan (2012FA) argues that the differential in productivity growth was accomplished by deregulation in the US at the end of the 1970s and during the 1980s. In contrast, Europe did not engage in reform with the exception of Germany in the early 2000s that empowered the German economy with significant productivity advantage. At the same time, technology and globalization increased relative remunerations in highly-skilled, educated workers relative to those without skills for the new economy. It was then politically appealing to improve the fortunes of those left behind by the technological revolution by means of increasing cheap credit. As Rajan (2012FA) argues:

“In 1992, Congress passed the Federal Housing Enterprises Financial Safety and Soundness Act, partly to gain more control over Fannie Mae and Freddie Mac, the giant private mortgage agencies, and partly to promote affordable homeownership for low-income groups. Such policies helped money flow to lower-middle-class households and raised their spending—so much so that consumption inequality rose much less than income inequality in the years before the crisis. These policies were also politically popular. Unlike when it came to an expansion in government welfare transfers, few groups opposed expanding credit to the lower-middle class—not the politicians who wanted more growth and happy constituents, not the bankers and brokers who profited from the mortgage fees, not the borrowers who could now buy their dream houses with virtually no money down, and not the laissez-faire bank regulators who thought they could pick up the pieces if the housing market collapsed. The Federal Reserve abetted these shortsighted policies. In 2001, in response to the dot-com bust, the Fed cut short-term interest rates to the bone. Even though the overstretched corporations that were meant to be stimulated were not interested in investing, artificially low interest rates acted as a tremendous subsidy to the parts of the economy that relied on debt, such as housing and finance. This led to an expansion in housing construction (and related services, such as real estate brokerage and mortgage lending), which created jobs, especially for the unskilled. Progressive economists applauded this process, arguing that the housing boom would lift the economy out of the doldrums. But the Fed-supported bubble proved unsustainable. Many construction workers have lost their jobs and are now in deeper trouble than before, having also borrowed to buy unaffordable houses. Bankers obviously deserve a large share of the blame for the crisis. Some of the financial sector’s activities were clearly predatory, if not outright criminal. But the role that the politically induced expansion of credit played cannot be ignored; it is the main reason the usual checks and balances on financial risk taking broke down.”

In fact, Raghuram G. Rajan (2005) anticipated low liquidity in financial markets resulting from low interest rates before the financial crisis that caused distortions of risk/return decisions provoking the credit/dollar crisis and global recession from IVQ2007 to IIQ2009. Near zero interest rates of unconventional monetary policy induced excessive risks and low liquidity in financial decisions that were critical as a cause of the credit/dollar crisis after 2007. Rajan (2012FA) argues that it is not feasible to return to the employment and income levels before the credit/dollar crisis because of the bloated construction sector, financial system and government budgets.

Table IIA-1 shows the euphoria of prices during the housing boom and the subsequent decline. House prices rose 62.9 percent in the US national home price index between Apr 2000 and Apr 2005. Prices rose 79.1 percent in the US national index from Apr 2000 to Apr 2006. House prices rose 28.0 percent between Apr 2003 and Apr 2005 for the US national propelled by low fed funds rates of 1.0 percent between Jul 2003 and Jul 2004. Fed funds rates increased by 0.25 basis points at every meeting of the Federal Open Aprket Committee (FOMC) from Jun 2004 until Jun 2006, reaching 5.25 percent. Simultaneously, the suspension of auctions of the 30-year Treasury bond caused decrease of yields of mortgage-backed securities with intended increase in mortgage rates. Similarly, between Apr 2003 and Apr 2006 the US national increased 40.7 percent. House prices have increased from Apr 2006 to Apr 2021 by 35.6 percent for the US national. Measuring house prices is quite difficult because of the lack of homogeneity that is typical of standardized commodities. In the 12 months ending in Apr 2021, house prices increased 14.6 percent in the US national. Table IIA-1 also shows that house prices increased 142.9 percent between Apr 2000 and Apr 2021 for the US national. House prices are close to the lowest level since peaks during the boom before the financial crisis and global recession. The US national increased 34.9 percent in Apr 2021 from the peak in Jun 2006 and increased 34.9 percent from the peak in Jul 2006. The final part of Table II-2 provides average annual percentage rates of growth of the house price indexes of Standard & Poor’s Case-Shiller. The average rate for the US national was 3.8 percent from Dec 1987 to Dec 2020 and 3.6 percent from Dec 1987 to Dec 2000. Although the global recession affecting the US between IVQ2007 (Dec) and IIQ2009 (Jun) caused decline of house prices of slightly above 30 percent, the average annual growth rate between Dec 2000 and Dec 2020 was 3.9 percent for the US national.

Table IIA-1, US, Percentage Changes of Standard & Poor’s Case-Shiller National Home Price Indices, Not Seasonally Adjusted, ∆%

	US National
∆% Apr 2000 to Apr 2003	27.3
∆% Apr 2000 to Apr 2005	62.9
∆% Apr 2003 to Apr 2005	28.0
∆% Apr 2000 to Apr 2006	79.1
∆% Apr 2003 to Apr 2006	40.7
∆% Apr 2005 to Apr 2021	49.1
∆% Apr 2006 to Apr 2021	35.6
∆% Apr 2009 to Apr 2021	69.5
∆% Apr 2010 to Apr 2021	71.3
∆% Apr 2011 to Apr 2021	79.0
∆% Apr 2012 to Apr 2021	79.8
∆% Apr 2013 to Apr 2021	64.9
∆% Apr 2014 to Apr 2021	52.8
∆% Apr 2015 to Apr 2021	46.5
∆% Apr 2016 to Apr 2021	39.5
∆% Apr 2017 to Apr 2021	32.1
∆% Apr 2018 to Apr 2021	24.1
∆% Apr 2019 to Apr 2021	19.9
∆% Apr 2020 to Apr 2021	14.6
∆% Apr 2000 to Apr 2021	142.9
∆% Peak Jun 2006 to Apr 2021	34.9
∆% Peak Jul 2006 to Apr 2021	34.9
Average ∆% Dec 1987-Dec 2020	3.8
Average ∆% Dec 1987-Dec 2000	3.6
Average ∆% Dec 1992-Dec 2000	4.5
Average ∆% Dec 2000-Dec 2020	3.9

Source: https://www.spglobal.com/spdji/en/indices/indicators/sp-corelogic-case-shiller-us-national-home-price-nsa-index/#overview

Monthly house prices increased sharply from Feb 2013 to Jan 2014 for both the SA and NSA national house price, as shown in Table IIA-3. In Jan 2013, the seasonally adjusted national house price index increased 0.9 percent and the NSA increased 0.3. House prices increased at high monthly percentage rates from Feb to Nov 2013. The most important seasonal factor in house prices is school changes for wealthier homeowners with more expensive houses. With seasonal adjustment, house prices fell from Dec 2010 throughout Mar 2011 and then increased in every month from Apr to Jul 2011 but fell in every month from Aug 2011 to Feb 2012. The not seasonally adjusted index registers increase in Mar 2012 of 1.4 percent. Not seasonally adjusted house prices increased 1.9 percent in Apr 2012 and at high monthly percentage rates through Aug 2012. House prices not seasonally adjusted stalled from Oct 2012 to Dec 2012 and surged from Feb to Sep 2013, decelerating in Oct 2013-Jan 2014. House prices grew at fast rates in Mar-Jul 2014. The SA national house price index increased 1.6 percent in Apr 2021 and the NSA index increased 2.1 percent. Declining house prices cause multiple adverse effects of which two are quite evident. (1) There is a disincentive to buy houses in continuing price declines. (2) More mortgages could be losing fair market value relative to mortgage debt. Another possibility is a wealth effect that consumers restrain purchases because of the decline of their net worth in houses.

Table IIA-2, US, Monthly Percentage Change of S&P Corelogic Case-Shiller National Home Price Indices, Seasonally Adjusted and Not Seasonally Adjusted, ∆%

	∆% SA	∆% NSA
December 2010	-0.1	-0.8
January 2011	-0.4	-1.1
February 2011	-0.8	-0.9
March 2011	-0.3	0.0
April 2011	0.0	1.0
May 2011	-0.1	1.1
June 2011	0.0	0.9
July 2011	-0.1	0.3
August 2011	-0.3	-0.4
September 2011	-0.5	-1.1
October 2011	-0.5	-1.3
November 2011	-0.6	-1.3
December 2011	-0.3	-1.1
January 2012	0.0	-0.7
February 2012	-0.1	-0.1
March 2012	1.0	1.4
April 2012	0.9	1.9
May 2012	0.7	1.9
June 2012	0.6	1.5
July 2012	0.5	0.8
August 2012	0.4	0.3
September 2012	0.4	-0.2
October 2012	0.5	-0.3
November 2012	0.7	0.0
December 2012	0.6	-0.1
January 2013	0.9	0.3
February 2013	0.6	0.6
March 2013	1.5	1.9
April 2013	1.0	2.0
May 2013	0.9	1.9
June 2013	0.9	1.7
July 2013	0.9	1.2
August 2013	0.9	0.7
September 2013	0.8	0.2
October 2013	0.6	-0.1
November 2013	0.5	-0.1
December 2013	0.6	-0.1
January 2014	0.6	0.1
February 2014	0.4	0.3
March 2014	0.3	0.8
April 2014	0.2	1.1
May 2014	0.2	1.1
June 2014	0.2	0.9
July 2014	0.3	0.6
August 2014	0.4	0.2
September 2014	0.4	-0.1
October 2014	0.4	-0.2
November 2014	0.4	-0.1
December 2014	0.4	-0.1
January 2015	0.4	-0.1
February 2015	0.3	0.2
March 2015	0.4	0.9
April 2015	0.3	1.1
May 2015	0.3	1.1
June 2015	0.3	0.9
July 2015	0.4	0.6
August 2015	0.5	0.3
September 2015	0.5	0.1
October 2015	0.6	0.0
November 2015	0.5	0.1
December 2015	0.5	0.0
January 2016	0.4	0.0
February 2016	0.2	0.1
March 2016	0.3	0.8
April 2016	0.3	1.1
May 2016	0.4	1.0
June 2016	0.4	0.9
July 2016	0.4	0.6
August 2016	0.6	0.3
September 2016	0.5	0.2
October 2016	0.5	0.0
November 2016	0.5	0.1
December 2016	0.5	0.1
January 2017	0.6	0.1
February 2017	0.3	0.2
March 2017	0.4	0.8
April 2017	0.4	1.1
May 2017	0.5	1.1
June 2017	0.5	0.9
July 2017	0.5	0.7
August 2017	0.6	0.4
September 2017	0.5	0.2
October 2017	0.5	0.1
November 2017	0.5	0.2
December 2017	0.6	0.2
January 2018	0.6	0.1
February 2018	0.5	0.4
March 2018	0.4	0.8
April 2018	0.4	1.0
May 2018	0.4	0.9
June 2018	0.4	0.8
July 2018	0.3	0.4
August 2018	0.4	0.2
September 2018	0.3	0.0
October 2018	0.3	0.0
November 2018	0.2	-0.1
December 2018	0.2	-0.2
January 2019	0.2	-0.2
February 2019	0.2	0.1
March 2019	0.2	0.7
April 2019	0.4	0.9
May 2019	0.4	0.8
June 2019	0.2	0.6
July 2019	0.2	0.4
August 2019	0.4	0.2
September 2019	0.3	0.1
October 2019	0.3	0.0
November 2019	0.4	0.1
December 2019	0.4	0.1
January 2020	0.5	0.1
February 2020	0.5	0.4
March 2020	0.5	0.9
April 2020	0.4	1.0
May 2020	0.2	0.6
June 2020	0.3	0.6
July 2020	0.7	0.8
August 2020	1.3	1.1
September 2020	1.4	1.2
October 2020	1.5	1.3
November 2020	1.4	1.1
December 2020	1.3	0.9
January 2021	1.3	0.8
February 2021	1.3	1.2
March 2021	1.5	2.0
April 2021	1.6	2.1

Source: https://www.spglobal.com/spdji/en/indices/indicators/sp-corelogic-case-shiller-us-national-home-price-nsa-index/#overview

Table IIA-4 summarizes the brutal drops in assets and net worth of US households and nonprofit organizations from 2007 to 2008 and 2009. Total assets fell $8.8 trillion or 10.4 percent from 2007 to 2008 and $8.0 trillion or 9.4 percent to 2009. Net worth fell $9.1 trillion from 2007 to 2008 or 12.9 percent and $7.7 trillion to 2009 or 11.0 percent. Subsidies to housing prolonged over decades together with interest rates at 1.0 percent from Jun 2003 to Jun 2004 inflated valuations of real estate and risk financial assets such as equities. The increase of fed funds rates by 25 basis points until 5.25 percent in Jun 2006 reversed carry trades through exotic vehicles such as subprime adjustable-rate mortgages (ARM) and world financial markets. Short-term zero interest rates encourage financing of everything with short-dated funds, explaining the SIVs created off-balance sheet to issue short-term commercial paper to purchase default-prone mortgages that were financed in overnight or short-dated sale and repurchase agreements (Pelaez and Pelaez, Financial Regulation after the Global Recession, 50-1, Regulation of Banks and Finance, 59-60, Globalization and the State Vol. I, 89-92, Globalization and the State Vol. II, 198-9, Government Intervention in Globalization, 62-3, International Financial Architecture, 144-9).

Table IIA-4, Difference of Balance Sheet of Households and Nonprofit Organizations, Billions of Dollars from 2007 to 2008 and 2009

	2007	2008	Change to 2008	2009	Change to 2009
A	84,734.3	75,908.4	-8,825.9	76,772.6	-7,961.7
Non FIN	30,625.8	28,152.7	-2,473.1	26,130.0	-4,495.8
RE	25,834.2	23,238.5	-2,595.7	21,199.4	-4,634.8
FIN	54,108.6	47,755.7	-6,352.9	50,642.6	-3,466.0
LIAB	14,502.0	14,398.4	-103.6	14,276.1	-225.9
NW	70,232.3	61,151.0	-9,081.3	62,496.5	-7,735.8

Source: Board of Governors of the Federal Reserve System. 2021. Flow of funds, balance sheets and integrated macroeconomic accounts: first quarter 2021. Washington, DC, Federal Reserve System, Jun 10. https://www.federalreserve.gov/releases/z1/current/default.htm

The apparent improvement in Table IIA-4A is mostly because of increases in valuations of risk financial assets by the carry trade from zero interest rates to leveraged exposures in risk financial assets such as stocks, high-yield bonds, emerging markets, commodities and so on. Zero interest rates also act to increase net worth by reducing debt or liabilities. The net worth of households has become an instrument of unconventional monetary policy by zero interest rates in the theory that increases in net worth increase consumption that accounts for 68.3 percent of GDP in IQ2021 (https://cmpassocregulationblog.blogspot.com/2021/05/us-gdp-growing-at-saar-64-percent-in_29.html and earlier https://cmpassocregulationblog.blogspot.com/2021/05/us-gdp-growing-at-saar-64-percent-in.html), generating demand to increase aggregate economic activity and employment. There are neglected and counterproductive risks in unconventional monetary policy. Between 2007 and IQ2021, real estate increased in value by $11,723.5 billion and financial assets increased $55,453.6 billion, explaining most of the increase in net worth of $66,684.8 billion obtained by deducting the increase in liabilities of $2741.6 billion from the increase of assets of $69,426.4 billion (with minor rounding error). Net worth increased from $70,232.3 billion in IVQ2007 to $136,917.1 billion in IQ2021 by $66,684.8 billion or 94.9 percent. The US consumer price index for all items increased from 210.036 in Dec 2007 to 264.877 in Dec 2020 (https://www.bls.gov/cpi/data.htm) or 26.1 percent. Net worth adjusted by CPI inflation increased 54.6 percent from 2007 to IQ2021. Real estate assets adjusted for CPI inflation increased 15.3 percent from 2007 to IQ2021. There are multiple complaints that unconventional monetary policy concentrates income on wealthier individuals because of their holdings of financial assets while the middle class has gained less because of fewer holdings of financial assets and higher share of real estate in family wealth. There is nothing new in these arguments. Interest rate ceilings on deposits and loans have been commonly used. The Banking Act of 1933 imposed prohibition of payment of interest on demand deposits and ceilings on interest rates on time deposits. These measures were justified by arguments that the banking panic of the 1930s was caused by competitive rates on bank deposits that led banks to engage in high-risk loans (Friedman, 1970, 18; see Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 74-5). The objective of policy was to prevent unsound loans in banks. Savings and loan institutions complained of unfair competition from commercial banks that led to continuing controls with the objective of directing savings toward residential construction. Friedman (1970, 15) argues that controls were passive during periods when rates implied on demand deposit were zero or lower and when Regulation Q ceilings on time deposits were above market rates on time deposits. The Great Inflation or stagflation of the 1960s and 1970s changed the relevance of Regulation Q. Friedman (1970, 26-7) predicted the future:

“These are the people who have the fewest alternative ways to invest their limited assets and are least sophisticated about the alternatives.” Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent. US economic growth has been at only 2.0 percent on average in the cyclical expansion in the 47 quarters from IIIQ2009 to IQ2021 and in the global recession with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (https://apps.bea.gov/iTable/index_nipa.cfm) and the third estimate of GDP for IQ2021 (https://www.bea.gov/sites/default/files/2021-06/gdp1q21_3rd_1.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.8 percent obtained by dividing GDP of $15,557.3 billion in IIQ2010 by GDP of $15,134.1 billion in IIQ2009 {[($15,557.3/$15,134.1) -1]100 = 2.8%], or accumulating the quarter on quarter growth rates (https://cmpassocregulationblog.blogspot.com/2021/06/us-gdp-growing-continuing-recovery-in.html and earlier https://cmpassocregulationblog.blogspot.com/2021/05/us-gdp-growing-at-saar-64-percent-in_29.html). The expansion from IQ1983 to IQ1986 was at the average annual growth rate of 5.7 percent, 5.3 percent from IQ1983 to IIIQ1986, 5.1 percent from IQ1983 to IVQ1986, 5.0 percent from IQ1983 to IQ1987, 5.0 percent from IQ1983 to IIQ1987, 4.9 percent from IQ1983 to IIIQ1987, 5.0 percent from IQ1983 to IVQ1987, 4.9 percent from IQ1983 to IIQ1988, 4.8 percent from IQ1983 to IIIQ1988, 4.8 percent from IQ1983 to IVQ1988, 4.8 percent from IQ1983 to IQ1989, 4.7 percent from IQ1983 to IIQ1989, 4.6 percent from IQ1983 to IIIQ1989, 4.5 percent from IQ1983 to IVQ1989. 4.5 percent from IQ1983 to IQ1990, 4.4 percent from IQ1983 to IIQ1990, 4.3 percent from IQ1983 to IIIQ1990, 4.0 percent from IQ1983 to IVQ1990, 3.8 percent from IQ1983 to IQ1991, 3.8 percent from IQ1983 to IIQ1991, 3.8 percent from IQ1983 to IIIQ1991, 3.7 percent from IQ1983 to IVQ1991, 3.7 percent from IQ1983 to IQ1992, 3.7 percent from IQ1983 to IIQ1992, 3.7 percent from IQ1983 to IIIQ1992, 3.8 percent from IQ1983 to IVQ1992, 3.7 percent from IQ1983 to IQ1993, 3.6 percent from IQ1983 to IIQ1993, 3.6 percent from IQ1983 to IIIQ1993, 3.7 percent from IQ1983 to IVQ1993, 3.7 percent from IQ1983 to IQ1994, 3.7 percent from IQ1983 to IIQ1994, 3.7 percent from IQ1983 to IIIQ1994 and at 7.9 percent from IQ1983 to IVQ1983 (https://cmpassocregulationblog.blogspot.com/2021/06/us-gdp-growing-continuing-recovery-in.html and earlier https://cmpassocregulationblog.blogspot.com/2021/05/us-gdp-growing-at-saar-64-percent-in_29.html). The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (https://apps.bea.gov/iTable/index_nipa.cfm). The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. Growth at trend in the entire cycle from IVQ2007 to IQ2021 and in the global recession with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event would have accumulated to 47.9 percent. GDP in IVQ2020 would be $23,318.7 billion (in constant dollars of 2012) if the US had grown at trend, which is higher by $4232.3 billion than actual $19,086.4 billion. There are more than four trillion dollars of GDP less than at trend, explaining the 27.4 million unemployed or underemployed equivalent to actual unemployment/underemployment of 15.8 percent of the effective labor force with the largest part originating in the global recession with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event (Section I and earlier https://cmpassocregulationblog.blogspot.com/2021/06/increase-in-may-2021-of-nonfarm-payroll.html). Unemployment is decreasing while employment is increasing in initial adjustment of the lockdown of economic activity in the global recession resulting from the COVID-19 event (https://www.bls.gov/covid19/employment-situation-covid19-faq-june-2021.htm). US GDP in IQ2021 is 18.2 percent lower than at trend. US GDP grew from $15,762.0 billion in IVQ2007 in constant dollars to $19,086.4 billion in IQ2021 or 21.1 percent at the average annual equivalent rate of 1.5 percent. Professor John H. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. Cochrane (2016May02) measures GDP growth in the US at average 3.5 percent per year from 1950 to 2000 and only at 1.76 percent per year from 2000 to 2015 with only at 2.0 percent annual equivalent in the current expansion. Cochrane (2016May02) proposes drastic changes in regulation and legal obstacles to private economic activity. The US missed the opportunity to grow at higher rates during the expansion and it is difficult to catch up because growth rates in the final periods of expansions tend to decline. The US missed the opportunity for recovery of output and employment always afforded in the first four quarters of expansion from recessions. Zero interest rates and quantitative easing were not required or present in successful cyclical expansions and in secular economic growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas (2011May). There is cyclical uncommonly slow growth in the US instead of allegations of secular stagnation. There is similar behavior in manufacturing. There is classic research on analyzing deviations of output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). The long-term trend is growth of manufacturing at average 3.0 percent per year from May 1919 to May 2021. Growth at 3.0 percent per year would raise the NSA index of manufacturing output (SIC, Standard Industrial Classification) from 106.8161 in Dec 2007 to 158.8071 in May 2021. The actual index NSA in May 2021 is 98.4433 which is 38.0 percent below trend. The underperformance of manufacturing in Mar-Aug 2020 originates partly in the earlier global recession augmented by the current global recession with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19. Manufacturing grew at the average annual rate of 3.3 percent between Dec 1986 and Dec 2006. Growth at 3.3 percent per year would raise the NSA index of manufacturing output (SIC, Standard Industrial Classification) from 106.8161 in Dec 2007 to 165.1264 in May 2021. The actual index NSA in May 2021 is 98.4433, which is 40.4 percent below trend. Manufacturing output grew at average 1.7 percent between Dec 1986 and May 2021. Using trend growth of 1.7 percent per year, the index would increase to 133.9244 in May 2021. The output of manufacturing at 98.4433 in May 2021 is 26.5 percent below trend under this alternative calculation. Using the NAICS (North American Industry Classification System), manufacturing output fell from the high of 108.5167 in Jun 2007 to the low of 84.7321 in May 2009 or 21.9 percent. The NAICS manufacturing index increased from 84.7321 in Apr 2009 to 99.0088 in May 2021 or 16.8 percent. The NAICS manufacturing index increased at the annual equivalent rate of 3.5 percent from Dec 1986 to Dec 2006. Growth at 3.5 percent would increase the NAICS manufacturing output index from 104.6868 in Dec 2007 to 166.0895 in May 2021. The NAICS index at 99.0088 in May 2021 is 40.4 below trend. The NAICS manufacturing output index grew at 1.7 percent annual equivalent from Dec 1999 to Dec 2006. Growth at 1.7 percent would raise the NAICS manufacturing output index from 104.6868 in Dec 2007 to 131.2547 in May 2021. The NAICS index at 99.0088 in May 2021 is 24.6 percent below trend under this alternative calculation.

Table IIA-4A, US, Difference of Balance Sheet of Households and Nonprofit Organizations Billions of Dollars from 2007 to 2019 2020 and IQ20201

	Value 2007	Change to 2019	Change to 2020	Change to IQ2021
Assets	84,734.3	49,564.6	64,242.0	69,426.4
Nonfinancial	30,540.4	9,422.5	12,900.5	14,058.1
Real Estate	25,834.2	7,729.0	10,755.1	11,723.5
Financial	54,108.6	40,227.5	51,426.8	55,453.6
Liabilities	14,502.0	1,918.7	2,554.0	2,741.6
Net Worth	70,232.3	47,645.9	61,688.0	66,684.8

Notes: Deposits: Total Time and Savings Deposits FL15303005; Net Worth = Assets – Liabilities

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