Saturday, November 5, 2011

The Twin Peaks of Prosperity

The following chart shows how many barrels of oil the typical production and nonsupervisory employee earns per hour.


Click to enlarge.

Source Data:
St. Louis Fed: Custom Chart

23 comments:

fried said...

Mark,
just to note that I love your charts...CR addicted me to chart porn, and happily yours cover very different ground.
Funny though,in 1998, I was working as a corporate employee and doing ok, not great. Since then, I've run my own small biz and am doing much better.
Per your chart, I'm an outlier...or jut noise.

Stagflationary Mark said...

This might not be as doom and gloomy as it appears.

1. LED bulb technology is amazing. I just upgraded our flashlights. They are SO much brighter and use less energy.

2. It is possible that we're near a twin trough of prosperity (see April 1980 in the chart vs. where we are today).

On the other hand (as has been pointed out time and time again here), advancing technology may not necessarily be compatible with strong job growth. It didn't exactly help cow employment.

Stagflationary Mark said...

fried,

CR addicted me to chart porn, and happily yours cover very different ground.

I probably attempt at least 20 charts a week but only post the ones that are the most obscene. Hahaha! ;)

Stagflationary Mark said...

Scary Thought of the Day

We took on debt like the prosperity wave from 1980 to 2000 (as seen in the chart) was permanent.

Oops.

Mr Slippery said...

I predict that we have not seen the trough yet in this cycle. I think oil is going to get more scarce and dollars are going to get more plentiful. That doesn't mean wages are going up because the current system distributes new dollars mostly to the already wealthy. It could get really ugly for the average wage earner.

tj and the bear said...

Just for kicks could you do the same vs. gold?

Hell, go crazy and do it vs. silver, tinfoil & toilet paper while you're at it! :-)

Stagflationary Mark said...

Mr Slippery,

You must know something about Mr Fusion that we don't. Care to share? Hahaha!

(Gallows humor)

Stagflationary Mark said...

tj and the bear,

Just for kicks could you do the same vs. gold?

You want me to resort to copying and pasting? What kind of fake journalist do you think I am? ;)

(More gallows humor)

Stagflationary Mark said...

Granted, the scale of the chart would change no doubt. It's not like the typical production and nonsupervisory employee is currently earning 0.2 ounces of gold each hour, lol.

(Even more gallows humor)

Troy said...

^ Mr Slippery speaks for me.

In general discourse people use the word "inflation" interchangeably with "wage-price spiral".

But I'm pretty sure this ain't the 1970s any more, and what obtained then does not obtain now.

Ohio's Issue 2 vote is a real ¡No PasarĂ¡n! moment -- not that I think it's all that great that redistribution should flow into fat benefit plans, but it's better than nothing I guess.

Regarding the chart, the late 90s did not fool me. I got my first new car in 2000 with a very weather eye on oil prices, and the price movement since then has not surprised me, not one bit, though back then I had no idea the degree to which the China trade was increasing their footprint in the oil market.

fried said...

This is a great interview with Satyajit Das and Max Keiser...
Das' conclusion is of course falling living standards in developed countries. I suppose that we are still considered a developed country.
No surprise there, but Das' discussion on the failure of "growth" as an economic cure-all is worth your time.

Global economic chaos-On the Edge with Max Keiser-11-04-2011 Video

Jerry Critter said...

I think it would be interesting to see the price of oil plotted on the same chart.

Troy said...

^ doesn't really add much:

http://research.stlouisfed.org/fred2/graph/?g=3cH

http://research.stlouisfed.org/fred2/graph/?g=3cG is interesting though, showing the economy had a nice tailwind 1960-1973, and 1983-2005.

Fritz_O said...

Troy,

Regarding the first graph, noting the period from ~1979 to 1984 and comparing this to the period from ~2004 to present...

To what do you attribute the parabolic spikes of $$/bbl. of the latter period verses the, shall we call it more orderly, runup of the previous period?

Rampant speculation?

Troy said...

Oil doubled from $66 to $132 2007-2008.

Oil went from ~$15 in 1979 to $40 in 1980 . . .

1979 had a bona-fide supply shock, which 2008 didn't AFAIK.

IIRC there was still some price control weirdness though, maybe that's screwing up the chart.

Fritz_O said...

"1979 had a bona-fide supply shock, which 2008 didn't AFAIK."

Ha, 2008 had a bona-fide illusory demand shock! lol

I didn't buy into the theory that Chinindia was causing a rough double in the $ of oil during the period. I could be wrong though. Maybe all those Buicks really were sold to the $5/day wage earners in China on credit. And maybe subsidized gas really was flowing like cheap wine. I don't know.

Scott said...

It will be interesting to see if anything happens when CFTC position limits on oil futures take effect.

Stagflationary Mark said...

Great comments everyone. Sorry I haven't been all that involved. I'm experiencing a bit of post-Halloween economics burnout apparently.

I am very curious to see how this Christmas season's economy does though.

Stagflationary Mark said...

Here's something to ponder when looking at the chart.

Interest rates were much HIGHER in 1980 than they were in 1973.

Interest rates are much LOWER now than they were in 1998.

Although I have stagflationary in my name and oil has been in a bull market for a decade, this is clearly not a repeat of the 1970s. It's much, much more complicated than that.

It is and has been my opinion that we're trying to add an inflationary 1970s environment to what would otherwise be a deflationary Great Depression environment. Two wrongs aren't making a right and we're therefore stuck with the high unemployment common to both eras.

Stagflationary Mark said...

Jerry Critter,

I think it would be interesting to see the price of oil plotted on the same chart.

If I plotted real oil prices (adjusted for inflation as seen in the CPI) you'd basically see an inverted version of this chart.

In comparison to volatile real oil prices, real wages have mostly flatlined for decades. In other words, the vast majority of the ups and downs in the chart are due to the changing price of oil.

Jerry Critter said...

That's what I suspected.

NOTaREALmerican said...

You've got some of most interesting charts.

I especially like your "exponential" series.

Keep up the good work!

Stagflationary Mark said...

NOTaREALmerican,

You are too kind!