Taking the long term view of real median household income

See this impressive chart from the New York Times showing the drop in real (cpi adjusted) median household income since 2000.  The source for this chart is a new Sentier Research report by two former officials at the U.S. Census Bureau (Gordon Green and John Coder). 

Source: New York Times based on Sentier Research Report:
Household Income Trends During the Recession and Economic Recovery

This approach of showing change over time compared to a single baseline reference value often proves to be much more interesting than month-over-month or year-over-year displays.

Before even reading the full article, an underlying story with high explanatory power literally jumps off this chart at you.

You can find further details at: Recession Officially Over, U.S. Incomes Kept Falling.  The article introduces some new and helpful metrics such as the average cut in pay at rehire for those who lost jobs.  The NYT article also provides some disaggregation of the headline number for different groups (by age, by education, by race) but unfortunately does not provide charts for these.

 

A Unique View of CPI from Doug Short

If you want to look at charts that help you understand what's going on in our economy, Doug Short's Updates is a great place to start.  His charts are crisp, clear, concise and easy to understand and he provides a wide multidimensional view of many potentially inter-related metrics all launching from his Update landing page.

Here is one of his charts that gives a unique view to the CPI data that I have not seen expressed elsewhere and is worthy of emulation and further extension..

http://advisorperspectives.com/dshort/charts/inflation/headline-core-comps.html?inflation-since-2000.gif

In the previous two posts, we showed year over year data which is a traditional and well respected method for smoothing out the month to month variability.  But as we all know, inflation is cumulative and so it makes sense to look at year over 2 years, year over 5 years, or year over 10 years changes and compare those to how our earning power has changed over that time period.  E.g. for those on fixed income in retirement, the longer view translates more directly to the degree to which inflation will impact their lives.  A 4 percent difference over the year will have a small effect.  A 35% change over 10 years will have a huge impact for anyone whose income is not keeping up.

Doug's breakdown of the component changes is also highly revealing. 

UPDATE 20 September 2011 at 3:00 PM

Of all the published charts I found online covering the latest release of CPI for August 2011, I found this chart from Doug Short to be by far the most valuable & useful by itself, while inspiring further questions encouraging the viewer to dig deeper.  The big advantages of this chart compared to the others are that

1. it shows the cumulative impact of inflation over an almost 12 year period
2. it breaks down the overall cpi effects into a series of selected and interesting sub-components which show a wide range of cumulative change during this time period.
3. it reveals Doug's thinking about which of the subcomponents he things might be the most important to pay closer attention to (Energy, Medical Care, and Tuition)
4.  And with a little thought it lets us get a hint about how the average headline cpi cumulative increase of 34.2% came about from a weighted average of the three (left most) componentss: a core cpi reading of 26.3% an energy reading of 124% and a food reading of 37.7%.  To me this showed up the weakness of focusing on either the headline cpi number or the core cpi number whether by themselves or even when combined becasue doing so leaves the cumulative impact of energy and food invisible to the viewer.

For me, this chart inspired me to dig deeper because it was crystal clear that headline cpi value cannot be understood unless you get a feel for its key components while looking at the cumulative change.  This letter eventually to the series of cumulative cpi charts we created in our subsequent posts: 

A 20 year cumulative view of headline cpi from FRED - showing cumulative readings of headline CPI by itself for 5, 10, 15, and 20 years periods

Drilling down into CPI 20 year trends - showing a set of interesting sub-components and their 5-20 year cumulative history

S&P 500 - Comparing nominal vs inflation adjusted performance

Hat tip again to Barry Ritholtz for this nice chart.

It's kind of interesting that almost all other economic metrics get adjusted (normalized) for inflation (e.g. GDP and hourly wages) but that we don't apply the same scaling adjustment to our stock market indices.

The long time scale for this chart makes it even more interesting. Note the devastation of the 1970s and how the inflation adjusted value has not yet recovered to its year 2000 peak.

Graph Showing Public Opinion During World War II

Hat tip to Josh Marshall over at TPM for his blog post with the link to this excellent, easy to read, hand drawn trend graphic showing public opinion during World War II.

This chart shows the complete time range and multiple relevant factors in enough detail that the trends for each factor can be readily discerned. The use of event labeling on the Top X axis adds to the value and usefulness of this chart.

Homicide rate since Ike

Nice chart from Angry Bear (hat tip Andrew Sullivan)

Unabated Violence - washingtonpost.com

Here's an important and easy to read graphic from this morning's Washington Post showing the impact of the surge so far on the number of reported violent attacks on civilians, Iraqi security forces and coalition forces.

Unabated Violence - washingtonpost.com

My preference for data like this would be to make the three separate trends individually viewable. The patterns for civilians and Iraqi forces are easy to miss because the the much reduced scale when all data is presented on the same chart.

See the accompanying WaPo article- No Drop in Iraq Violence Seen Since Troop Buildup for further details.

GAO May 15 Rebuilding Iraq Report

Here's a link to the recent General Accounting Office Rebuilding Iraq Report - May 15, 1007.

Once chart I found enlightening and eye opening was their oil chart showing history covering the range of 1970 to 2005. [Click for larger image]

I also found the enemy initiated attack chart easily digestible although as I have commented before, I am not a huge fan of stacked bar charts unless there is also an easy way to look at the individual indicators.

Applying Trend Analysis Principles with Brilliant Effect

Buying a camera at a fair price is not particularly earth-shaking activity, especially compared to trying to figure out whether our actions in Iraq are helping or hurting.

Nevertheless, here is a simple and striking example of the power of applying the essential principles of trend analysis to the task.

Pricescan.com did a brilliant job on this in my opinion.

The red trend line represents the high price, the blue the average price, and the green the low price. Each tick mark on the X axis represents one week's time and the chart covers the period from 9/11/2006 through 6/4/2007

What did pricescan.com do right

1. they identified the most important factors (in this case the minimum, average, maximum price for the Canon PowerShot AS710 IS camera.
   
2. they collected the raw data each week of the price of this item from a range of sources
3. rather than showing the raw data, they created calculated values of High, Average, Low price for each period
4. They selected a reasonable reporting rate that fit with the data (1 week in this case) and the resulting trend lines are relatively smooth while still giving us enough data points to have confidence in our understanding of the trends we see developing. A total of approximately 38 data points are plotted for each factor.
5. their Y axis scaling fits the data and makes it possible to see the trends in all three indicators that they displayed. The scale values are also easy to read.
6. they are reporting their data in near real time. The most recent data point is only 5 days ago.
   
7. They showed the entire time period ( I am guessing from product introduction right up through last Monday)

And of course, they visualized this data for us rather than telling us about it or showing us a table of 100+ numbers.

Armed with this easy to read chart, anyone interested in purchasing the Canon PowerShot AS710 camera in the next week or so will know whether the offering price is within a reasonable range and can then get on to evaluating the other factors that might impact their buying decision.

This example stands in stark contrast to the most approaches to other important areas of our lives as exemplified in yesterday's Iraq Forecast post. There are no mushy metrics or imprecise quantification or flowery metaphors. There's no postponing the moment of truth cop-outs saying we don't know exactly what the future will bring. Of course we don't know exactly. We never do.

They don't say: "we can't really tell you whether the price of this item is going to become more affordable by September".

There's just the relevant facts that help deal with the specific situation.

My two cents: the better we learn how to apply this kind of approach to the most important problems in our lives, the quicker we will begin to gain control of what's happening.

BLS Compensation Report

The latest Bureau of Labor Statistics report on wages and benefits includes these relatively easy to read charts that highlight the employment compensation trends over the past 6+ years. The moderately long time frame makes it easy to detect patterns and compare recent behavior to the situation at the turn of the century.



With the second chart, using the non seasonably adjusted numbers for the percent change over 12 months makes a lot of sense.

The red lines in the 2nd and 3rd charts plot the same metric. The blue line converts those wage gains to constant dollars and makes pretty clear how little this has changed over the past 6 years.

It would have been nice to see the total compensation chart including wages and benefits adjusted to constant dollars.

Looking behind the headline number.

Here's a good example of the power that acrues the minute that we begin to look behind the headline number and see what other factors might bear on the meaning of what we are seeing.

The Big Picture Watching Trading Volume Fade . . .

In this case, insteaed of just looking at the S&P 500, Barry Ritholtz points us to a Michael Kahn Barron's article where he takes a look at the volume as well and discovers some interesting patterns.

What other factors might be worth adding into the mix and giving us even more depth of understanding of the basic workings of this important headline financial indicator?

For example, it would be interesting to see what percentage of the S & P volume was NEW short sales and what percentage of the volulme was Covering Purchases for previous short sales.

It might also be worthwhile to look at the average number of shares per trade which might give a clue into what percentage of the volulme was due to large financial instituions and what part was coming from the "little guy."

Monthly trade deficit

Another great chart from Calculated Risk

You can find the full post here

Chart of the Day - www.chartoftheday.com

Here's another nice chart from Chart of the Day - www.chartoftheday.com

On the plus side we have the complete time range and the use of the derived value of the inflation adjusted DOW as the variable to watch rather than the Headline raw DJIA value. In my view, the inflation adjusted number really should be the Dow value that we watch for the same reasons that we use inflation adjusted numbers everywhere else.

Historical Bear Market Contractions

Barry Ritholtz continues his track record at finding and sharing interesting and useful charts that provide new perspectives at looking at important data. You can find the full post at:
The Big Picture Historical Bear Market Contractions

I liked the creative way that the width of the bars in this chart shows the second dimension of length of the contraction period.

Business Capex - Another Nice Chart

Hat tip again to Barry Ritholtz who regularly posts some charts well worth looking at as with today's post on: The Big Picture Business Capex Rolling Over

It sure does look like capital spending has turned a big corner.

The chart is courtesy of Bob Bronson. You can find some more of Bob's posts here.

For reference, here's is a similar chart from about 6 months ago.I found it interesting how well Bob's analysis back in October, before the raw data turned the corner, was able to predict the recent changes in Capex.
I also like the way Bob has integrated textual explanations and graphical pointers right in with the charts themselves.

The only negative point I see with this presentation is that the dates are hard too read clearly.

Another Easy to Read Housing Chart

Here's another easy to read chart that I find attractive from Political Calculations' post on the Boom in Realtors. The long time sweep creates excellent perspective. It would be interesting to zoom in on the past 30 years for another view.

San Diego Mortgage Defaults & Foreclosures

Here's a nice crisp chart that I think is instantly understandable. I especially like the long time sweep so the most recent data can be put into perspective. You can find the full story at:
voiceofsandiego.org: Toscano... Motivated Sellers Abound


It would be nice to be able to flip through a series of charts like this for a sampling of strategic areas or state by state to be able to compare how the San Diego trends match up against other parts of the country.

Hat tip to Kirk for this post at Reasons Unbeknownst

Comparing Nasdaq to S & P - another nice chart

Here's another nice chart from: MarketBeat Blog - WSJ.com : Getting Technical on Tech comparing the Nasdaq indesx (NDX) to the S & P index over the past 10 days.



These kinds of simple two way comparisons create charts that are easy to read and understand.

Nice Chart of the impact of Apple's Launch

Nice Chart. simple, direct, powerful. The proverbial one that's worth a thousand words all on its own.



Hat tip again to Barry Ritholtz over at The Big Picture for an excellent chart ("via Andrew' via Yahoo charts) today showing the impact of Apple's Launch announcements today on the intra-day price of Apple's stock compared to some of its competitors (Palm & Rimm)