Saturday, August 10, 2013

The Illusion of an Auto Industry "Recovery"

The following chart shows the 12-month moving average of total vehicle miles traveled.

Click to enlarge.

What recovery? For what it is worth, I do not believe we will ever reach that peak again. If four full years of "recovery" combined with 4+ years of ZIRP hasn't made any progress towards returning to our former illusionary glory, then what can?

This chart implies that there will not be any long-term auto industry growth within the U.S. (other than the temporary pent-up demand created during recessions). How's that for greatly depressing?

The next chart shows the total vehicle miles traveled per capita.

Click to enlarge.

I know this sounds crazy, but ever since yesterday on the road, I've been seeing this shape. Shaving cream, pillows. Dammit! I know this. I know what this is! This means something. This is important. - Roy Neary, Close Encounters of the Third Kind, 1977

As seen in the chart, welcome to 1998. I turned into a permabear in the fall of 2004 (just as the upward trend was beginning to peak). I watched the stock market roar on without me into 2007. I then watched as the stock market come roaring back down. It's roaring back up again on the misguided hopes of luring me back in perhaps. I have but one thing to say.


July 19, 2013
Calculated Risk: DOT: Vehicle Miles Driven increased 0.9% in May

With all these factors, it might take several more years before we see a new peak in miles driven.

Based on what? Put me down for never. Seriously. If we're driving even half as many miles per capita after our population has doubled, then I would be extremely surprised. It would mean that the virtual reality video games of the distant future, pardon my language, suck. It would also mean that hasn't figured out a way to automate most retail sales jobs (or for that matter, jobs in general). I'm certainly not betting on that outcome! This is assuming our population even will double of course. I have my doubts on that as well. Things happen to countries stuck in ZIRP.

Working Age Population in Japan

Click to enlarge.

July 9, 2013
Baby bust? National birthrate hits an all-time low due to weak economic recovery

The recession has been over for four years, but the birth rate in the U.S. continues to fall as many people struggle with a sluggish economy and financial uncertainty.

According to a recent analysis by the Pew Institute, since 2007 when there were a record 4,316,233 births, the number of births has been steadily declining, with 4,007,000 births in 2012 - the lowest number since 1998.

Like I said previously, welcome to 1998.

I'll leave on this bonus thought. If the economy of the future really does stink then perhaps more people will start to carpool. Could there be any more single occupancy vehicles out on the road? I'm not being judgmental. I'm as guilty as the next person. I'm just saying that there is plenty of fat to cut when the fat needs cutting. And as a side note, Ben Bernanke desperately wants us to not cut the fat, lest we experience Great Recession II, return of the killer recession. Sigh.

Source Data:
St. Louis Fed: Moving 12-Month Total Vehicle Miles Traveled
St. Louis Fed: Moving 12-Month Total Vehicle Miles Traveled per Capita
St. Louis Fed: Working Age Population: Aged 15 and Over: All Persons for Japan


Stagflationary Mark said...

Here's a bit of back of envelope math.

According to a recent analysis by the Pew Institute, since 2007 when there were a record 4,316,233 births, the number of births has been steadily declining, with 4,007,000 births in 2012 - the lowest number since 1998.

4,007,000/4,316,233 = -7%

That's 7% fewer Americans being born than many would have expected back in 2007.

On the one hand, they can't help pay for my social security in 20 years or so if they don't exist.

On the other hand, I'm not exactly counting on great job creation over the next 20 years or so. I won't have to help pay their unemployment if they don't exist.

Brace for the sarcasm. Here it comes.

Win, win!

Stagflationary Mark said...

Technically speaking, the formula came out to 0.93. It's late. I did the math in my head without even really thinking to get to -7%. I should have shown my work better though.

Stagflationary Mark said...

One more thought from the link on the baby bust.

Researchers say that during times of recession, the birthrate goes down, but as the economy picks up, women begin to have babies.

We haven't been in a recession for 4+ years! We're in the supposed expansion right now. You know, when the economy supposedly picks up.

I suppose researchers also say that during times of recession, the driving rate goes down, but as the economy picks up, people start to drive more.

Still waiting! Guess this isn't your garden variety expansion. It's still got recession written all over it. Big shocker.

Forehead. Desk. Whack. Whack. Whack.

Troy said...

There's also wonky timing issues with the baby boom and its echo, however.

The baby boom peaked in 1957 at 4M, and its centroid is at 1955. We hit a demographic minimum in the mid 1970s, before Gen Y started arriving in 1980.

So the population of 30 yos is going to increase from here.

For some reason, statisticians consider people 80+ as working age, the closest I can get with FRED numbers is the 54 cutoff, which itself is interesting:

Red is total population less the non institutional population age 25-54.

25-54 is the peak net productivity age (output less health costs) so it's a pretty good population for the 'makers'.

The 'takers' -- kids, old people, inmates, and military, are all in that red series I think.

The baby boom is just starting to leave the blue line and enter the red line, too -- they're age 49 to 67 right now.

Troy said...

same as above, as a ratio of maker/taker

Troy said...

^ story of the baby boom, really. Aging into adulthood in the 1970s, entering retirement now.

Though their support costs as kids in the 60s and 70s was a lot less than their support costs as 70 and 80 yos this decade and next!

But I think it's important to consider the Keynesian nature of this spending. Yes, it is entirely broken-window-parable spending, but this economy can use any middle-class stimulus it can get . . .

Plus all the SSA checks going on *will* be spent right back into the economy.

We don't have any supply-side problems (other than oil, LOL) we have demand-side problems, not enough work.

We've got plenty of money, too. Problem is all the "savers" have it . . .

Mr Slippery said...

A calculated risk heckling Calculated Risk?

Great Recession II, return of the killer recession.

Great Recession II, ZIRP Harder!

Great Recession II, Electric Boogaloo

Great Recession II, Jason Takes the Fed

Great Recession II, Yellen vs. Predator

Great Recession II, Ben and Tim's Bogus Hourney

Mr Slippery said...

Great Recession II, Ben and Tim's Bogus Journey [fixed]

Stagflationary Mark said...


There's also wonky timing issues with the baby boom and its echo, however.

Indeed there are. Nice charts!

On a related topic, I do not believe that the global population will grow to the moon, any more than a locust population can.

It will someday take down a great many exponential growth stories with it. I won't be around to see it, more than likely. I just find it interesting.

Stagflationary Mark said...

Mr Slippery,

A calculated risk heckling Calculated Risk?

I didn't intend for it to be a heckle so much as a relatively strong disagreement. He's turned very optimistic lately and I think it shows with this prediction. It assumes there will be improvement in the future even though there has been zero improvement so far.

Further, for the first time we're seeing a divergence in the opinions of Calculated Risk and Robert Shiller. Both saw the bubbles in the past (as did I) and I have respected both of them for it. They can't both be right now though. I'm in Shiller's camp.

Great Recession II, ZIRP Harder!


Great Recession III, ZIRP Hard with a Vengeance

Great Recession IV, Live Free or ZIRP Hard

I sure hope we choose ZIRP Hard, because I'd really like the Homeland Security of the future to install cameras inside my house. You know, for my own protection, lol. Sigh.

TJandTheBear said...

Excellent work again, Mark. I've been meaning to do the same sort of thing to debunk the "housing recovery" BS but am not the chart master that you are.


Recently read an excellent piece on demographics and economic growth. Let's just say it's a good thing they decided to artificially goose, ahem "recalculate", the GDP, because there isn't a chance in hell of real growth in the coming decades.

Stagflationary Mark said...


You are too kind!

I suspect that we'll both look back years from now and say...

Dead Cat Bounce

Stagflationary Mark said...

As a side note, gold should be interesting to watch.

On the one hand, I believe that real yields of the future will be lower because I believe real GDP growth will suck. That should support gold's price in theory, since gold's inflation adjusted price tends to be higher when real yields are low.

On the other hand, I could also see real oil prices of the future be lower because people just stop driving so much. That should depress gold's price in theory, since many like to look at the oil to gold price ratio.

May we live in interesting times.

As for China, Carpool Campaign Gets Rolling in China’s Capital. Gotta love that global transportation rebalancing act!