Sick of the RNC yet? Enough of the political mumbo jumbo. Here’s some stuff you might already know, but haven’t seen the data.
The last row of the following table shows GDP per Capita growth of Sweden, UK, Germany, Greece, Spain, and Italy relative to the United States.
Over the time period, German production per head grew 16.54% faster than in the United States . Since 2005, Germans “gained” on the United States in terms of wealth. Countries in duress, such as Spain, Italy, and Greece lost in terms of wealth over the time period relative to the US. Americans became wealthier than the UK, Greece, Spain, and Italy over the 10 year time period. Americans lost wealth relative to Sweden and Germany.
The above graph shows per capita growth of the economies of Sweden, the UK, Germany, Spain, Italy, and Greece relative to the United States.
Savings and Unemployment rates:
Theoretically, we would expect savings rates to rise as unemployment falls, and vice versa. As economies go through booms, people will spend more but also save more. As economies recess, people will lose jobs and spend less, but savings is spent. Dueling effects:
- Wealth Effect – As unemployment rises, wealth falls. As wealth falls, savings rates increase. This effect results in unemployment and savings rates to move together.
- Income (cyclical) Effect – Consumption rises and falls with the business cycle. In other words, as unemployment rises, incomes fall. As income falls and more people are in between jobs, savings must be spent. This effect results in unemployment and savings rates to move inversely.
Correlation between Savings Rates and Unemployment:
From the correlations between Savings Rates and unemployment, we can infer about the was a country behaves in times of boom and bust. (break it down into time periods). The marginal propensity to save (mps) is an economics term used to describe what percentage of each paycheck we save. From the above data, we can safely assume that Americans will save more when the economy is in recession relative to others, whereas the savings rate in Sweden is relatively impervious to fluctuations in unemployment. Italy actually has a positive correlation coefficient between Unemployment and Savings rates! This means as unemployment goes up savings rates go up! The dominating effect here is the wealth effect. People will spend much less when they don’t have a job. The dominating effect in the US economy is the cyclical effect.
Perhaps this is a result of work force participant optimism. Perhaps the fear of getting another job in the near future after being let go is small in the United States. This could also be the result of cultural differences between Italy and the US, such as employee turnover rate. However, turnover rate in Italy is higher.
Italy’s job turnover rate has been declining over the last ten years (http://tinyurl.com/zefsqc2). This metric is computed by dividing the number of employees who left jobs by the total number of employees still working. In the United States, the figure for May of 2016 was 3.4%, or 11.8% annually. In Italy, the figure was 23.9% in 2004 and 17.3% in 2014. This higher turnover rate means Italians are leaving jobs at a higher frequency, both by choice and otherwise. The rate in the United States has largely remained unchanged since 2002, hovering around 12% annually.
Perhaps it is cultural differences. Maybe Italians are more prone to save when they don’t have a job because they have a firmer family structure than the average American. They are taken care of at home, and aren’t forced to spend on groceries and rent. Again, this is all guesswork.
Side note: Here is the annualized employee turnover rate in the US broken down over each month. More people leave jobs in January and August than any other months in the year.
Just something to think about.