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THE DON JONES INDEX… |
GAINS POSTED in GREEN LOSSES POSTED in RED |
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4/23/14…
15,101.59 |
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4/16/14…
15,107.84 |
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6/27/13… 15,000.00 |
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(THE DOW JONES INDEX: 4/23… 16,501.65; 4/16… 16,424.85; 11/19/12… 12,592.22)
LESSON for APRIL 23, 2014
Continuing our
inquiry into recent wage growth, labor costs, productivity and inflation, as it
affects, Don Jones, we have confirmed the following (see note (a) and charts in
last week’s DJI)…
1)
Recent statistics show that Don Jones has seen a
recovery… admittedly an anemic one… since January, 2013. Most of the benefit, however, has accrued to
the top quintile (20%) and even more to the one percent of lucky Dons.
2)
Inflation, as
measured by the CPI, has not been equal across the board. Gasoline (despite a welcome dip in the
recession of 2008) and food have increased at slow, steady rates and… while the
index of medical costs stands at nearly double that of the overall CPI, it has
stood that way since before 2006, indicating a long-term and institutional
problem.
3)
The best of all times for American workers (if one
considers American workers lazy and overpaid when their wages and other costs
are matched against productivity) began with the election of Ronald
Reagan! From the end of World War II
(when recording of statistics began) until 1980, yearly productivity
outperformed labor costs – by as much as 60% in the years of LBJ’s Great
Society. But parity had returned by 1980
and, by Y2K, labor was being paid more and more for producing less and
less. Since, a gradual sliding back to
parity has occurred, with both wages and productivity indices down, as a
consequence of unemployment and recession.
4)
Productivity and compensation have both declined
significantly compared to inflation. In
1970, the USL Index stood at three-fourths that of the CPI and, ten years
later, it was still two-thirds of yearly inflation. Thereafter, a slow but steady decline took
place, irregardless of political considerations. The ratio had fallen to 60% by 1990, and
continued to decline… the 50% line was reached and crossed in 1995 and, today,
the USL stands at less than 45% of the CPI and productivity is only slightly
higher.
This
week, we are going to take a closer look at specifics (particularly in other
components of the CPI), draw in some global considerations and, finally,
extrapolate our findings somewhat to, perhaps, answer the question: Barring
significant, governmentally-imposed changes in the rules, will Don Jones’
children dwell in a Utopia or its opposite, Dystopia?
The CPI measures historical Consumer Prices for
Urban Consumers in the United States, with a baseline of 1982-4 equaling
100. Last measured for January, 2014 at
233.916, it has had relatively consistent gains of two to three percent per
year until the recent recession.
(Curiously, while it fell near or below 2% in the odd numbered years
between 2007 and the present… actually reaching statistical zero in 2009… it
has been above average in the even years, despite the recession. By this standard, 2014 should be a costly year…
and with the spikes in food and gasoline, seems to be holding true!)
Aside
from food and medical care… which are further broken down into sub-categories…
and gasoline (a component of the “energy” category that also includes heating
fuel), representative items indexed for inflation include the following…
|
FOOD |
TRANSPORTATION
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COMMODITIES |
HEALTH/MISC. |
SHELTER |
|
Cereals Bakery products Meats Poultry Fish Eggs Milk Cheese Fresh fruits Fresh vegetables Processed fruits/vegetables Nonalcoholic
beverages Coffee Sugar and
sweets Fats and oils Other foods Food away from
home Alcoholic
beverages Cigarettes Other tobacco products |
New vehicles Used cars and
trucks Motor vehicle
parts/equipment Motor vehicle maint. & repair Leased cars
and trucks Public
transportation Gasoline (all
types) Other motor fuels Motor vehicle
fees & taxes Motor vehicle insurance Parking fees Airline fares Intercity
transit fares - bus Intercity
transit fares - train Intracity public
transit Ship fares |
Apparel Men’s and boys’ apparel Women’s/girls’ apparel Infants’/toddlers’ apparel Footwear Jewelry & watches Photography Sporting goods Toys Admissions
(movies, events) Recreational
books/pubs Educational books/supplies Tuition, fees,
and childcare College tuition and fees Personal
computer hardware Computer software Internet services Cable and satellite service Video media,
sales Video media, rental Audio media |
Medical care
services Professional services Physicians’ services Dental services Eyeglasses and eye care Prescription
drugs Nonprescription drugs Medical equip. & supplies Hospital
services Inpatient hospital services Outpatient hosp. services Nursing homes
& adult day Invalid/elderly homecare Health
insurance Funeral expenses Legal services Financial services Personal care
products Personal care services Pets and pet
products Pet services (inc. veternry.) |
Rent of
primary residence Lodging away
from home Owners’
equivalent rent Tenant/household insurance Housing at school Energy
services Electricity Fuel oil Propane, kerosene, wood Utility (piped) gas service Water, sewer,
trash pickup Furniture and
bedding Appliances Clocks, lamps, etc. Indoor plants and flowers Televisions Other video hardware Audio hardware Telephone
hardware Telephone services |
Alright, which
of these have become more affordable to the Joneses, which have become less. Comprehensive
CPI statistics on these items only go back to 2006 which is disappointing but,
perhaps, fair because some of these items (like computer equipment) don’t go
back much further. However, a separate
chart goes into even more detail, and indexes most of the items to a baseline
of 1982-4, affording Don Jones some inkling of how his ability to purchase, for
example, milk (still a bargain, love those subsidies!) as opposed to college
tuitions (tell Junior to join the Army, instead). Most of the items that are currently most
expensive were also expensive in 2006, indicating that inflation (or, in some
cases, deflation) has been going on for a long, long time.
All of these
items are indexed on the BLS/CPI tables 24-29 (Adobe PDF), available over the
BLS website here. The overall index also has been calibrated
since 1948, using a base of 1967 that raises the unadjusted indices by about
300%, by 2013. However, no particulars
are included. The 2006-13 overall index was used in last week’s computations of CPI and labor
costs, and figures for February and March are now also listed. To reiterate, the overall CPI tracks from
about double in 2006, and fifteen percent higher… seven years and three months
later... a rate reflecting the recession that began in 2008 and has now either
ended or not, depending upon who you ask.
Again, these
figures are…
|
2006 |
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
2013 |
2014 (Apr.) |
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201.800 |
210.036 |
210.228 |
215.949 |
219.179 |
225.672 |
229.601 |
233.049 |
236.293 |
Next, we merely
take note of some of the more egregious examples of savings and gouging, as
affect those certain necessities and vanities the Jones family consumes… bearing
in mind that the above table reflects a “normal” rate of inflation without any
indexing to wages, other labor costs, productivity, unemployment or any other
factor. The overall food and beverages
index has, for example, was 240.226, slightly higher than the overall CPI since
December, 2008, before which it was slightly lower. Basic shelter costs have also kept on a more
or less steady pace but, whereas the price of furnishings like linens and
clocks has dropped by nearly 75% compared to the overall index, the price of a
room in Junior’s fraternity house has nearly doubled (reflective of an
inexplicable rise in the costs of education).
For instance…
CPI Tables One
and Three (both designated CPI-U) contain the unadjusted and seasonally
adjusted price increases or decreases from March, 2014 to either February, 2014
or February, 2013. Here, too, is to be
found a Relative Importance Index from March, 2013 in which all consumables…
food, shelter, energy and the all-inclusive “commodities”… are ranked by the
CPI’s estimation of “importance”. Just
how much importance does our government assign to the price of ham? To funeral expenses? Is this rating system valid? How does it track compared to the Don Jones
Index?
A refinement of
the above are Tables Six and Eight… calculated for
Urban Wage Earners and Clerical Workers (CPI-W)… where there are slight
variations from the adjusted inflation for all Americans. An example: the CPI-U level of importance for
Food and Beverages is 14.901 (out of 100.0); the unadjusted index for March,
2014 is 236.293 (with
the base of 100.0 existing 1982-4).
CPI-W raises the level of importance for Food and Beverages to 15.540
and the unadjusted March, 2014 index to 239.662.
More on Tables
One, Three, Six and Eight next week.
Tables 24 and
27… Historical Consumer Price Index for All Urban Consumers (CPI-U and
CPI-W)... date back to 1913, but list only the aggregate indices, without
specification by category; the Tables 25-6 (CPI-U) and 28-9 (CPI-W) are those
which list by category. In each
instance, the first named is that indexed to 1982-4 and the second reflects
percentage increases.
Because Don
Jones is both a wage-earner and non wage-earner, and dwells in both urban and
rural settings, the DJI is going to use Table 25 as its source for the CPI on
specific items over the last seven years.
The DJI lists expenditures on food, gas and taxes as significant enough
for inclusion apart from the overall inflation rate, but tax increases (or
decreases, if existing) are slippery, squirrelly things and further divided
into federal, state and local levies.
The CPI, too, lists certain fees and taxes… mostly local and/or
service-based; things like motor vehicle registration fees, public transit
fares and postage stamps… it chooses to exclude major outlays like Federal
income and estate taxes, social security taxes and various state and local
sales “revenue enhancements” (to use a popular euphemism).
In 2006, Don
paid about twice as much for “All Items” (201. 800) as he did during the 1982-4
baseline. By last month, that had risen
to 236.293 or, according to the yearly increments of Table 26 (which does not
list total CPI changes over 2006-14), 17% since December, 2005. Inflation was at its worst in 2007 (4.1%) and
in 2011 (3.0%) but when the bottom dropped out of the Dow in 2008, inflation
sank to barely above zero.
2008, on the
other hand, was a bad year for food prices, which increased 5.8% over
2007. In 2006, the CPI index for “Food
and Beverages” was 194.400, slightly below that for All Items. By last month, however, it stood at 240.226,
slightly above the All Items index… some other high-inflation years were the
aforementioned 2007 and 2011, while 2009 saw an actual decrease of four tenths
of a percent as recession, undoubtedly, spread throughout the markets.
In almost all
instances, food prices on items that were already high in 2006 continued
rising. Cereal products and meats
slightly outperformed the CPI over this seven year period; dairy products
(particularly milk) remained cheaper.
(Look for meat prices to increase significantly over 2014… food is as
much a captive of Mother Nature as it is of Wall Street machinations.) Fresh fruits and vegetables, already pricy
seven years ago, continued to skyrocket – particularly oranges and tangerines;
again, a casualty of the polar vortex and soon to become stratospheric. Processed foods (including juices), however,
remained more affordable. Other bargains
include coffee (but not for long), candy, salt, pickles, salad dressing and
school lunches.
Of nearly 200
items, none decreased in price. The smallest increase, at less than one
percent a year, belonged to the much maligned carbonated sodas, accused by
former New York Mayor Bloomberg, among others, of filling up the bellies of the
poor with empty calories.
Alcohol, by the
way, lagged slightly behind the CPI of all food items, but cigarettes and
tobacco products have been taking a hit, as the taxman increasingly seems them
as lucrative vices.
Since 2006, the
cost of gasoline has risen 300% faster than the All Items index. December, 2005 actually saw prices at the
pump lower than the All Items index –
prices that then spiked in 2007, fell back to near record lows in 2008, then
climbed back again beginning in 2009.
They leveled off last year, but began rising as the new
year dawned, climbing 5% in March, alone.
(Gas prices,
like stock prices, are largely driven by fear of the future and… with the
Mideast spring locked in a terrorist vortex and ongoing Russian excursions into
Ukraine… there will be plenty of fear to go around in 2014. The only possible curb is another recession,
or even depression, and this has to be admitted to be a very possible
possibility.)
CPI has been
guilty of category jumping, with gasoline being counted in the Transportation
Index, in some reckonings, and Shelter in others (on the premise that the
majority of fuel expenses arise from home heating, air conditioning and
electricity, with gasoline just an adjunct). The price of fuel oil has kept pace with or
even exceeded CPI increases in gasoline, but natural gas and electricity have
barely mirrored the All Items index. In
fact, electricity (at 164.8 in December, 2005, only some 80% of All Items) has
experienced modest inflation to 204.131 (still below All Items) last month,
changing places with natural gas (221.3 in 12/05 but now only 199.340, even
with a 15% spike since the Christmas season… again, probably attributable to
that damned Polar Vortex increasing demand).
Looking for
bargains? We’ll show you a few next
week, along with our attempts to decode the mysterious CPI commodity Importancy Index.
And Don Jones? Well, inflation
wasn’t his downfall last week, as CPI figures still haven’t come in. But we all know that he is gonna take a hit.
Meanwhile, the Dons on hourly salaries saw their wages cut and, although
BLS statistics haven’t come in yet, the Debtclock
figures implied a return to recession and joblessness. The only factor that prevented the week from
being an all-out disaster was a sharp rise in home prices… a boon for the
Joneses trying to sell, a bust for those trying to buy.
THE DON JONES INDEX
CHART of
CATEGORIES w/ VALUE ADDED to EQUAL BASELINE of 15,000.00
(REFLECTING…
approximately… DOW JONES INDEX of
June 27, 2013)
The sum of good things, less the sum of bad things,
equals the gain (or loss) to Don Jones.
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DON JONES’ PERSONAL ECONOMIC
INDEX (45% of total Index points) |
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DON 4/23/14 |
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1518.37 |
1513.96 |
http://www.tradingeconomics.com/united-states/wages 10.34 nd 1031 |
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http://stats.oecd.org/Index.aspx?DataSetCode=IDD .038 nd
(2010) |
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Official # |
http://www.usdebtclock.org/ 10282 10251 10406 |
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http://www.usdebtclock.org/ 19329 19279 19450 |
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Dow Jones index 16424.85 16501.65 |
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http://www.realtor.org/topics/existing-home-sales -0.2 (4.59M) http://www.realtor.org/research-and-statistics
189 nd
198.5 |
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http://www.newyorkfed.org/research/data
indicators/household index.html
and http://www.usdebtclock.org/ 51696 51746 |
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http://www.bls.gov/news.release/cpi.nr0.htm +0.2 (mar) nd |
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http://www.usdebtclock.org/ 17581 17546 |
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http://www.usdebtclock.org/ 2897 2902 |
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http://www.usdebtclock.org/ 3523 3525 |
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http://www.usdebtclock.org/ 61456 61483 |
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4/16/14 |
153.83 |
153.83 |
http://www.census.gov/foreign- trade/statistics/highlights/congressional.html 190.4F nd |
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http://www.census.gov/foreign-trade/statistics/highlights/congressional.html
2327F nd |
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141.55 |
141.55 |
http://www.census.gov/foreign-trade/statistics/highlights/congressional.html 423F nd |
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http://www.usdebtclock.org/ 5908 5965 nd |
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The usual suspects are arguing that the
end of the world is at hand. The other
usual suspects say El Nino’s to blame. |
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Is the bug that’s eating up Florida
orange crops natural or not. (Like
many other things, it’s an Asian import.) |
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Celebrations
all around as the Boston Marathon concluded without incident. |
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Finally, the President showed a little testicular
fortitude in sending paratroopers to Poland… which is, at least, nearer to Ukraine than Georgetown. |
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Primary
season is underway and, fueled by the Koch Brothers and Citizens United, so
is the morbid fun. Do Republicans
really hate other Republicans more than they hate Democrats |
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Mr. Putin denies that Russia
has a hand in the pro-Russian militia attacks in Donetsk & environs. But what’s that purple on his fingers? Africa?
Shhhh! |
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Bad news confined to the wage
inflation front as Don Jones experiences sticker shock on food, gas &
just about everything else with lower pay.
But hey!... they finished the Boston
Marathon. |
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The Don Jones Index for the week of
March 12th through March 18th was DOWN 6.25 points.
Comments, complaints, donations (especially SUPERPAC
donations): feedme@generisis.com
(a) Comparative
indices of labor costs, productivity and CPI (from http://donjonesindex.com/dji140416htm) .
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(U.S. Labor Costs (USL) Base 8/15/2007(1) (with comparisons to Productivity and CPI) |
Productivity (base 2009) |
CPI w. increase Unemployment (base 82-4) |
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USL index(2) USL
v/ Prod. USL v/ CPI |
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2014
- 2013
- 102.743 97.67 44.59 2012
- 101.265 96.68 44.67 2011
- 101.362 98.28 46.03 2010
- 98.203 95.74 45.32 2009
- 99.226 101.77 47.00 2008
- 102.222 106.38 48.42 2007
- 101.123 106.86 49.96 2006
- 96.876 102.10 48.85 2005
- 93.798 100.11 48.98 2004
- 96.786 106.10 52.26 2003
- 91.684 105.82 50.46 2002
- 92.284 109.21 52.11 2001
- 92.456 115.40 52.80 2000
- 95.857 123.21 56.79 1995
- 83.747 123.01 55.72 1990
- 76.811 121.88 60.29 1985
- 66.436 115.00 62.97 1980
- 52.652 98.96 67.68 1975
- 37.702 78.25 72.36 1970
- 28.963 66.59 76.62 1965
- 23.599 61.35 74.92 1960
- 23.139 70.29 78.17 1955
- 20.278 75.66 1950
- 18.261 75.77 1948 (1) baseline of Jan.
1st (2) see, also, hourly wages after 2006 |
105.194 104.747 103.133 102.527 97.501 96.087 94.634 94.866 93.671 91.225 86.641 84.497 80.115 77.800 68.083 63.020 57.771 53.208 48.184 43.495 38.466 32.919 |
(b) 6.7% 230.4 (+1.63%) 7.8% 226.7 (+2.95%) 8.3% 220.2 (+1.62%) 9.2% 216.7 (+2.65%) 9.7% 211.1 ( 0 ) 7.8% 211.1 (+4.25%) 4.9% 202.4 (+2.07%) 4.6% 198.3 (+3.99%) 4.7% 190.7 (+2.97%) 5.3% 185.2 (+1.93%) 5.7% 181.7 (+2.60%) 5.8% 177.1 (+1.14%) 5.7% 175.1 (+3.73%) 4.2% 168.8 (+2.24%) 4.0% 150.3 (+2.35%)* 5.6% 127.4 (+2.41%)* 7.3% 105.5 (+2.71%)* 6.3% 77.8
(+2.99%)* 6.3%(1) 52.1
(+2.76%)* 8.1%(2) 37.8
(+2.40%)* 3.9% 31.5
(+2.13%)* 4.9% 29.6
(+2.21%) * 5.2% 26.8
(+2.22%)* 4.9% 24.1 6.5% 3.4%
(3) * 5 year average (1) anomalous: 1982-3 (2) anomalous: 1975 (3) anomalous: Oct. 1949 |
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(b) No data as of last week. CPI now up t0 236.293 through March which
increase, if continued through the year, would result in a record 15+%
inflation rate for 2014.