US Accounts From Bubble to Bust: 2003 to 2009 Gretchen Donehower EWC Conference on Population and the Generational Economy, Honolulu June 12, 2010
1.6
S&P 500 Index Level
Selected US Economic Indicators 2003 - 2009
1.5 1.4 1.3
Median Home Price
1.2
Real GDP per Capita
1.1 1 0.9
Unemployment
0.8 0.7 2003
2004
2005
2006
2007
2008
2009
How can NTA illuminate this picture? • Flow equation provides framework to examine aggregate impacts – Produce, Consume, Share, Save
• Age profiles show how the generational economy absorbs the crisis
But first… disclaimers! • The more recent the year, the more preliminary the macro estimates. • Some 2009 variables are imputed because the consumption survey microdata is not available yet
Lab Inc Asset Inc, Pub
The US Macroeconomy
Asset Inc, Priv Cons, Pub Cons, Priv Trans, Pub Trans, Priv
2009 2004 - 2008
Saving, Pub
2003
Saving, Priv -2,000
0
2,000
4,000
Billions of 2003 US$
6,000
8,000
10,000
Macroeconomy “Bust” • Production falls • Consumption flat – private share decreases while public increases
• Sharing (with Rest of World) flat – not significant amounts and no change
• Saving falls – private share increases while public decreases
80 70
Lifecycle Deficit: -Not much change for children -Adult surplus is lower -Old age deficit lower, until oldest ages
60
2003 US$ ( 000's)
50 40 30 20 10 0 -10
2003
-20
2009
-30 0
20
40
60 Age
80
50
2003 US$ ( 000's)
40
2003
30
2005
Labor Income: -Drops for young -Rises for old
20
2007 2009
10
0 0
20
40
60 Age
80
2009 Level / 2003 Level
Labor Market Changes: -Older workers and oldest old very different patterns -Starting out and mid-career workers squeezed at each stage
Labor Force Participation
1.2
Earnings (of employed) 1 Employment (of those in LF) 0.8 15 20 25 30 35 40 45 50 55 60 65 70 75 80 Age
35 30
Private Asset Income: -Only 60-80 see any increase
2003 US$ ( 000's)
25 20
2003
15 10
2009 5 0 -5 0
20
40
60 Age
80
0.0 -0.2
Public Asset Income: -Lower interest rates lower cost of debt
(2003 US$ ( 000's)
-0.4 -0.6 -0.8 -1.0
2003
-1.2 2009 -1.4 -1.6 0
20
40
60 Age
80
80 70
Consumption: -Maintained at same level even while income goes down.
2003 US$ ( 000's)
60 50 40 30
2003 20 2009 10 0 0
20
40
60 Age
80
40
Public and Private Consumption: -Public up, private down -Largest changes at old ages
35
Private
2003 US$ ( 000's)
30 25 20 15 10
Public
2003
5
2009
0 0
20
40
60 Age
80
30
Transfers: -Higher public to old and young paid for by working ages -Older people making bigger transfers (this is mostly intrahousehold)
25
(2003 US$ ( 000's)
20 15 10
Public
5 0 -5
Private
2003 -10
2009
-15 0
20
40
60 Age
80
Bad times: 2006 to 2009
Change in Household Size
2%
0%
Good times: 2003 to 2006
-2% 0
5
Larger households in response to economic hardship?
10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 Age
20
Saving: -Big increase in public dissaving -Big increase in private saving by older persons only
2003 US$ ( 000's)
15
10
Private
5
0
2003
-5
Public
2009 -10 0
20
40
60 Age
80
What have we learned? • Recession squeezing incomes of younger workers; they save even less (but don’t consume less?) • Government providing higher public transfers and consumption to dependent ages, financed through debt • Some indication that older people are working more and using the additional income to save and share with co-resident family
