Automakers Are Having a Record Year, but Here’s a Trend that Should Worry Them
U.S. auto sales closed out the summer on a positive note, topping estimates and casting some rosy light on the health of the American consumer. Recording its best August since 2003, the auto industry is on pace to sell 17.8 vehicles in 2015, well ahead of expectations of 17.3 million. If the numbers hold up, 2015 will be the best year ever for U.S. auto sales, beating the 17.4 million mark set in 2000.
The general consensus is that auto industry is in pretty good shape these days. Gas prices and interest rates are low, boosting the market for cars and light trucks. More than 2 million jobs were added to the U.S. economy in the past year, and more jobs is usually good news for auto sales. The unemployment rate has been trending lower for five years, sitting at a relatively healthy 5.3 percent in July.
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As with any statistic, though, there’s more than one way to look at the situation. Sure, auto sales are climbing as the economy gets stronger and more Americans hit their local car dealers’ lots. At least to some degree, though, higher auto sales should be expected just as a result of U.S. population growth. And those rising monthly sales figures are masking a continuing trend that is more worrisome for the auto industry: per capita auto sales are still in a long-term decline, even including the solid growth the industry has seen since the end of the recession. Doug Short at Advisor Perspectives did the math and made a graph:
According to Short’s analysis, the peak year for per capita auto sales in the U.S. was 1978. As the red line in the graph shows, the trend is negative since then.
In the graph, per capita auto sales in January, 1976, were defined as 100; the readings in the index since then are relative to that 1976 sales level. As you can see, the index moves higher until August of 1978, when per capita auto sales were up nearly 20 percent over 1976. Since then, per capita auto sales have fallen, reaching a low in 2009 that was nearly 50 percent lower than 1976. Since 2009, per capita auto sales have risen nicely, but are still more than 15 percent below peak.
What could explain the negative trend? Two factors come to mind. First, demographics. It has been widely reported that the millennial generation is less interested in owning cars for a variety of reasons, ranging from a weak economy to a cultural shift away from suburban life. However, the data on millennial car purchases is ambiguous; recently, millennials have started buying cars in volumes that look a lot like their elders. And even if millennials are less interested in buying cars, their preferences can’t explain a shift that began in the 1970s, before they were born.
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The other factor that may explain the trend is income inequality. A study of car ownership by the Carnegie Foundation found that countries with higher income inequality have fewer cars per capita. The logic is simple: As more income is claimed by the wealthy, there’s less to go around for everyone else. And that means there’s less money for middle and lower income groups to buy and maintain automobiles, among other things.
Here’s a chart of the Gini index for the U.S. since 1947. (The Gini Index is a widely-used measure of income inequality. A higher Gini number means higher inequality.) Note that the Gini reading started climbing in the late ‘70s – the same time when per capita car ownership in the U.S. began to fall.
This chart tells us, not for the first time, that the U.S. has experienced more income inequality since the 1970s. Combined with the per capita auto sales data above, it suggests that as the rich have gotten richer and everyone else has struggled to keep up, car ownership has suffered. Although this is by no means proof of the relationship between income inequality and per capita car ownership over the last 40 years, it hints at an interesting theory – and suggests that the auto industry has good reason to be concerned about growing inequality in the U.S.
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The 10 Worst States to Have a Baby
The birth rate in the U.S. is finally seeing an uptick after falling during the recession. Births tend to fall during hard economic times because having a baby and raising a child are expensive propositions.
Costs are not the same everywhere, though. Some states are better than others for family budgets, and health care quality varies widely from place to place.
A new report from WalletHub looks at the cost of delivering a baby in the 50 states and the District of Columbia, as well as overall health care quality and the general “baby-friendliness” of each state – a mix of variables including average birth weights, pollution levels and the availability of child care.
Mississippi ranks as the worst state to have a baby, despite having the lowest average infant-care costs in the nation. Unfortunately, the Magnolia State also has the highest rate of infant deaths and one of lowest numbers of pediatricians per capita.
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On the other end of the scale, Vermont ranks as the best state for having a baby. Vermont has both the highest number of pediatricians and the highest number of child centers per capita. But before packing your bags, it’s worth considering the frigid winters in the Green Mountain State and the amount of money you’ll need to spend on winter clothing and heat.
Here are the 10 worst and 10 best states for having a baby:
Top 10 Worst States to Have a Baby
1. Mississippi
- Budget Rank: 18
- Health Care Rank: 51
- Baby Friendly Environment Rank: 29
2. Pennsylvania
- Budget Rank: 37
- Health Care Rank: 36
- Baby Friendly Environment Rank: 51
3. West Virginia
- Budget Rank: 13
- Health Care Rank: 48
- Baby Friendly Environment Rank: 50
4. South Carolina
- Budget Rank: 22
- Health Care Rank: 43
- Baby Friendly Environment Rank: 49
5. Nevada
- Budget Rank: 39
- Health Care Rank: 35
- Baby Friendly Environment Rank: 46
6. New York
- Budget Rank: 46
- Health Care Rank: 12
- Baby Friendly Environment Rank: 47
7. Louisiana
- Budget Rank: 8
- Health Care Rank: 50
- Baby Friendly Environment Rank: 26
8. Georgia
- Budget Rank: 6
- Health Care Rank: 46
- Baby Friendly Environment Rank: 43
9. Alabama
- Budget Rank: 3
- Health Care Rank: 47
- Baby Friendly Environment Rank: 44
10. Arkansas
- Budget Rank: 12
- Health Care Rank: 49
- Baby Friendly Environment Rank: 37
Top 10 Best States to Have a Baby
1. Vermont
- Budget Ranks: 17
- Health Care Rank: 1
- Baby Friendly Environment Rank: 5
2. North Dakota
- Budget Rank: 10
- Health Care Rank: 14
- Baby Friendly Environment Rank: 10
3. Oregon
- Budget Rank: 38
- Health Care Rank: 2
- Baby Friendly Environment Rank: 14
4. Hawaii
- Budget Rank: 31
- Health Care Rank: 25
- Baby Friendly Environment Rank: 1
5. Minnesota
- Budget Rank: 32
- Health Care Rank: 5
- Baby Friendly Environment Rank: 12
6. Kentucky
- Budget Rank: 1
- Health Care Rank: 33
- Baby Friendly Environment Rank: 20
7. Maine
- Budget Rank: 25
- Health Care Rank: 10
- Baby Friendly Environment Rank: 15
8. Wyoming
- Budget Rank: 22
- Health Care Rank: 17
- Baby Friendly Environment Rank: 7
9. Iowa
- Budget Rank: 14
- Health Care Rank: 25
- Baby Friendly Environment Rank: 9
10. Alaska
- Budget Rank: 50
- Health Care Rank: 6
- Baby Friendly Environment Rank: 2
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Worried About a Recession? Here’s When the Next Slump Will Hit
The next recession may be coming sooner than you think.
Eleven of the 31 economists recently surveyed by Bloomberg believed the American recession would hit in 2018, and all but two of them expected the recession to begin within the next five years.
If the recession begins in 2018, the expansion would have lasted nine years, making it the second-longest period of growth in U.S. history after the decade-long expansion that ended when the tech bubble burst in 2001. This average postwar expansion averages about five years.
The recent turmoil in the stock market and the slowdown in China has more investors and analysts using the “R-word,” but the economists surveyed by Bloomberg think we have a bit of time. They pegged the chance of recession over the next 12 months to just 10 percent.
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While economists talk about the next official recession, many average Americans feel like they’re still climbing out of the last one. In a data brief released last week, the National Employment Law Project found that wages have declined since 2009 for most U.S. workers, when factoring in cost of living increases.
A full jobs recovery is at least two years away, according to an analysis by economist Elise Gould with the Economic Policy Institute. “Wage growth needs to be stronger—and consistently strong for a solid spell—before we can call this a healthy economy,” she wrote in a recent blog post.
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