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Americans: Driving More, Spending Less, Losing Faith?
Via ConvergEx's Nick Colas,
If we measured the U.S. economy only by how much Americans were driving around, you’d have to be surprisingly optimistic about the current pace of growth. Based on the latest government data (May 2015), miles driven have increased by 3-5% year-over-year every month since December 2014. That’s better than either GDP growth or base population growth. So what gives?
First, the long run correlation (1970 – present) between miles driven and incremental employment growth is 45%. That makes sense – over 80% of Americans commute in a car – and highlights an improving labor market picture.
At the same time, the 6 month average growth for miles driven is +4%, versus just 2% for employment growth. The balance, therefore, is likely related to discretionary driving tied to lower gasoline prices.
Now, if all these folks would just spend some money when they got out of their cars, we’d have a real economic recovery...
Of all the data related to the U.S. economy, to my mind the most impressive one is “3.1 trillion” – the number of miles Americans have driven over the last 12 months. That is the equivalent of over 15,000 round trips to the Sun (93 million miles away) or just over half a light year. If one person did all the driving, they could reach the nearest star in about eight years. And if those numbers are too vast to consider, try this one: Americans drive the equivalent of 120 million times around the Earth every year.
The Great Recession took its toll on driving, of course, but far less than you’d think. From a peak pre-Crisis total miles driven of 3,039 billion miles (12 months ending November 2007), the trough was 2,942 billion (12 months ending November 2011). That’s a drop of just 3.2%, showing just how much Americans rely on their cars. Of course, once you factor in driving-age population growth of 1% that number looks a little starker. Still, there was all kinds of chatter as miles driven declined over this period about how Americans rode their bikes to work now, and how hipsters were forgoing cars to live in Brooklyn and that teenagers didn’t even care about getting a driver’s license.
Those automotive obituaries were premature, to say the least. Starting in July 2013, miles driven began to accelerate. In June 2014, the 12 month growth rate exceeded 1% for the first time since the Financial Crisis. Then, in January 2015, it went past 2%. For the year ending May 2015, the most recent data available, it is 2.9%. Looking at individual months, December’s year over year growth was 5.0%, and January 2015 was 4.9%.
A few words on the data behind this analysis before we draw some economic conclusions:
The U.S. Department of Transportation gathers and publishes “Traffic Volume Trends” monthly with data gathered from approximately 4,000 continuous traffic counting locations nationwide. There is a link to their website at the end of this note if you would like to see the whole report and several charts summarizing the data attached to this note.
Because we are a skeptical bunch over here at Convergex, we cross-reference the miles driven data with information on gasoline usage from the U.S. Energy Information Agency. This dataset comes from the private sector and is aggregated by the EIA. The correlation between the DOT’s miles driven and the EIA’s gas consumption is excellent: 70% since June 1974 and 77% since January 2007. The slippage is likely due to the structural improvements in fuel efficiency forced by Federal laws which mandate certain minimum average fuel economy standards for vehicle manufacturers. Since 1973, for example, the average American car or gasoline-burning light truck has gone from 12.8 miles/gallon consumed to 22.3 miles/gallon. The largest gains, as the accompanying chart shows, occurred in the 1980s.
Declines in miles driven since 1970 are extremely rare, and the Great Recession was the longest period of such underperformance on record. The 1973 oil shock produced 10 months of negative comps and the 1979 Iranian Revolution pushed comparisons lower for 17 months. Both of those were, of course, periods when oil prices spiked. Conversely, oil prices peaked in mid-2008 but we saw 29 consecutive months of declining year over year miles driven starting in May 2008 and another 9 months in 2011.
So what should we make of this sudden urge Americans seem to feel to hit the road? Three points here:
Most Americans – some 85% – commute to work in their car and the majority (75%) does so alone. They are mostly on the road between 6:30am and 8:00am and then again from 4:00pm to 6:00pm. The fact that driving miles are increasing is therefore a sign that labor markets are truly picking up. We’ve included a chart of the growth in miles driven versus the growth of the employed workforce and the long run correlation is 45% when you smooth out some of the data choppiness with a 6 month rolling average.
Different parts of the economic cycle – contraction, bottom, expansion and peak – exhibit differing levels of correlation between miles driven and workforce expansion. That makes sense – at a bottom there is little discretionary driving and the only uptake is incremental employment. Then, towards a top, people drive more to shop or take vacations. The gap between employment growth (2% year over year in the total employed population) and miles driven (3.9% rolling 6 month average of year-on-year growth) shows that we are likely more towards the top of a cycle. Put another way: people are driving more, but it’s not just because more workers have jobs. Rather, they are taking trips they might have put off during the last few years.
Cheaper energy prices must be playing a role here, but it is hard to quantify their exact contribution. The easiest comparison would be to the late 1990s, when oil prices went below $10/barrel and filling up the largest SUV only required a $20 bill. Miles driven rose by 2-3% a year from that point to 2001. We’re getting that kind of growth now, with $40/barrel oil and only moderate help from rising equity prices rather than dot-com mania.
To sum up, Americans are finally driving more. Some of that comes from a better labor market. An additional piece stems from discretionary travel. And a final component is due to lower fuel costs. All those factors point to a better economic backdrop for the second half of 2015. If the U.S. can’t generate better labor market and economic growth with these tailwinds, what will it take?
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Road rage is soaring as well
"If the U.S. can’t generate better labor market and economic growth with these tailwinds, what will it take?"
Pretty lame article. "Driving" has nothing to do with anything.
What will it take to regenerate our world's economy?... Eliminate the parasitic, useless usury system we ALL have around our necks and watch the economy bloom.
Correlation is not causation and how these numbers are derived is problematic. There are a lot of places where you have to drive because the only other choice is walking.....
“3.1 trillion” – the number of miles Americans have driven over the last 12 months.
What a bunch of bullshit. Who gives the final say on what articles ZH is going to add to the site? FIRE him now!
Perseus has spoken.
How about the number of miles are going up because people are not commuting twice a day but maybe 4 or 6 times because they work multiple part time jobs and therefore maybe are driving farther and more trips?
Maybe more miles are being logged cause of Uber drivers now providing cab services?
Since the government now is the primary purchaser of Government motors vehicles maybe the government workers are driving more to wear out the cars so they can keep buying more?
My explanations are just as plausible as those in the article
Hunter/gatherers traditionally ventured further and further away from their dwellings in order to secure sustenance for themselves when their local food sources (wages) have depleted. Hence, the increase in transportation costs to obtain those said household benefits.
Prescient observation..as a modern day hunter gatherer, a guy weighs the travel expenses (effort) against the hopeful payback..trying to find that hidden overlooked valley of business, get in, make a profit, and get out with their money and scalp...once such a place is discovered, a guy either moves there or just says the hell with it and stays put..also, a guy so inclined has to keep an eye on the 'weather'...it may not be worth the risk., but it sure sucks to be a decent H&G in a dying villiage...e'rerybody wants your shit all the time.
losing faith???
Taxpayer money going to sell baby parts? I would say we have lost our faith.
And single mothers selling themselves for money, wow American culture at it's best.
dark sarc: well atleast they use those parts for theoritically finding cures for our elites. Sadam hussien just throws babies out of incubators on to the floor.
Sadam hussien just throws babies out of incubators on to the floor.
That was proven to be propaganda.
Gas is still too high!
Exactly. Since when is a gas price of more than $1 low?
Gasoline should be free.
Perseus has spoken.
Lets keep up the staged attempt to destroy the one man who can turn the econnomic picture around with behavior and questions like those of Megan Kelly and Chris Wallace at the 1st Republicanm circus last night. The problem with the wholse sytem is that its broke and Fox News and Bonier and McConell have faied America.
tastin' of the pure a bit early today?
We are driving more because all the soup kitchens near our tent-cities and obama-villes are out of food, and we need to drive further out to look for more free shit to feed ourselves
Saving 20c a gallon only saves me enough to drive to the mall, not buy anything there.
And, by the way, gasoline hasn't dropped nearly as much as it did when oil bottomed out earlier this year. We're still in the $2.50-2.60 range in my area. When oil hit similar prices in Jan/Feb this year we were in the $2.05 range. And that is NOT just the usual summertime rate hike.
Correct. And the spread between grades has widened out to about 25 cents, up from 20 a year or so ago, up from 15 a couple years ago, up from the traditional 10 when oil hit $150 in 2008. Slowly but surely, the public is being squeezed of every last drop of wealth, like a python with a rabbit.
Better labor market? Dude's gotta read the participation numbers. - Ned
With the entire financial system rigged to funnel the results of all human productivity into the pockets of the Pharisees, how in Hell is any sort of growth supposed to be generated?
Humanity is going to have to decide to rise up and cast off the slave chains of the psychopaths. Until we do, as a whole, nothing will improve for anyone but the psychopaths and their sycophants.
may be they are driving more to look for a job that pays enough to make a stop and buy coffee, but they have not found one yet-at least not one that pays more
A lot of kids I know of live out of their cars and commute farther to work min wage jobs.
What a loser of an article. People are driving more 'cuz they don't have a job and got fuck else to do expect drive to the local mall. Ever gone out at 2 in the afternoon - those traffic jams around the mall are not folks working. Also, 10,000 new retirees of the baby boomer generation hit the roads every day.
I know a few people who are driving more. They live in far-flung exurbs and there aren't any jobs near where they live. Mass Transit is a joke in most parts of the country. So they have to drive. One guy I know is stuck with an underwater mortgage a full 40 miles from the only job he can find that pays enough to service that mortgage, not to mention the car he puts a minimum of 80 miles a day on. These aren't rural folks either; this is in a major metropolitan area.
He's not driving more because things are getting better. He's driving more to keep things from getting much, much worse. Not the same thing.
You mention the "Mickey Mouse" components of a "better economy" and ask the sophmoric question of what will it take. You fail to mention the 3 gorillas in the room for most middleclass Amerikans; 1) outrageous health care cost increases thank you very much Emperor Goebbels, 2) rising rents as fewer sheeple can afford a house, and 3) rising food costs in just about everything but especially meat. Oh, but wait ... I forgot the FED says there is no inflation and if you strip out food, housing, and medical costs everything is beautiful. WTF.
www.traderzoo.mobi
I think you are seeing the growth of the underground markets...the cash only do not pay taxes market...the illegals all do this....they are working but gettid under the table....but they buy food....and gas....their job will not show up in the government numbers because their employers do not report ....or pay taxes....
They drive more because the only thing getting cheaper is gas...
No faith.
Everyone's buying new cars, of course they'd be driving it!
This article does not attempt to curve for mandatory increased mileage standards, possible increased usage of electric/hybrid vehicles, and -critically- what the cause for increased mileage would be.
Given the BLS's own numbers showing an increase in 'self-employment' and 'consulting', it is entirely likely that any increase in miles driven is attributable to shrinking local economies. In turn, people are pushed to drive farther and farther from home.
Anecdotally, I can certainly attest to that.
1. Lower gas prices helps me to buy more gas, so I can drive more, but still I don't have any extra money to spend when I drive somewhere thanks to ever increasing rents, utilities, groceries, etc.
2. Cannot speak for everyone, but I have zero faith in the US system of government at present. That could incrementally change of course if things start turning around for better and for real...not just hope-n-hype from the media arm of the plutocracy. Those in "power" need to take a look around and say you know what...this isn't working. We need to work together for the benefit of all, not just a few. Maybe that's too idealistic, so let it rot.
"The fact that driving miles are increasing is therefore a sign that labor markets are truly picking up." The simple-mindedness behind such a conclusion is startling. Why couldn't all these miles simply be for increased medical care or perscription refills? Maybe funeral processions are getting longer as we plant more boomers?
"To sum up, Americans are finally driving more. Some of that comes from a better labor market. An additional piece stems from discretionary travel. And a final component is due to lower fuel costs. All those factors point to a better economic backdrop for the second half of 2015."
Not much to say, other than gentlemen like Mr. Colas are so far removed from ground-level reality that it's not even worth addressing. Reality is coming, and when it arrives, members of the FSI (financial services industry) like Mr. Colas and his 'data', are going to wiped clean off the table and forgotten as if they, and their 'data' both, never existed.
I've notice more Uber drivers on the road lately.
I have got 2 of these..... only put 2000 miles on car last year.
Cost to charge these things? about 10 eurocents and can go 30 miles.
No parking fees and can drive right up to front door of shops.
https://www.youtube.com/watch?v=WJZU37hC6HU
Can easily hold 3 bags of groceries. and as a test I put 4 bags of quick cement on back and it pulled away with ease. Electric motors have loads of torque.
I'll tell you what it will take. It will take $30 trillion in physical gold bullion, BuckO, that's what it will take.
'tailwinds'? are you fucking kidding me?