The headline macro-economic data for the U.S. economy can be confusing. Following an inspiring 6.9% real GDP growth rate in Q4 2021, the economy contracted by -1.6% in the first quarter and -0.6% in the second quarter of 2022. Despite this setback, labor markets were still doing exceptionally well. Although the unemployment rate rose slightly to 3.7 percent in August, it can be actually considered a ‘good’ signal as both the labor participation rate and net new employment increased.
Figure 1: U.S. Real GDP
Figure 2: U.S. Unemployment Rate
Real GDP and unemployment are such broad-based numbers that they often do not provide a good depiction of the whole picture, especially when they are painting different scenarios of the underlying economic activity. So, we gathered and analyzed some interesting alternative data for a microscopic view of what is really happening under the surface in the U.S. economy.
Transportation is a great barometer of economic health and, in particular, the health of the labor market. While it’s obvious for daily commuting and business travel, it also applies to recreational travel. In general, unemployed people tend to travel less due to mental and financial stresses. So, studying transportation data can offer interesting insights.
The global pandemic has significantly affected transportation. Among all modes of transport, air travel was hit the hardest. While the average number of daily Transportation Security Administration (TSA) throughput at U.S. airports was 2.3 million in 2019, this number dropped to its lowest point on April 14, 2020, at 87,534, only 4 percent of its typical pre-pandemic level. Now, as more people are fully vaccinated and the unemployed rate has been slashed dramatically, the 30-day moving average is standing at 2.25 million.
Figure 3: U.S. Air Travel
One legacy of the pandemic is the work-from-home culture. Although the influence of Covid-19 is steadily fading away in many aspects, people seem to enjoy the flexibility of remote working. According to a recent survey released by McKinsey in June 2022, 35% and 23% of employed respondents are allowed to work remotely in a full-time / part-time basis, respectively. Now, NYC subway weekday ridership is 60% of its level before the pandemic. Considering a portion of people opt-out of public transportation since the pandemic, this subway data supports the survey’s findings and again indicates a healthy labor market. Interestingly, the ridership at weekends recovered about 10% better than weekdays. This suggests that social activities and personal consumption are coming back even stronger, and the economy is in good shape.
Figure 4: New York Subway Ridership
Now let’s switch gears to the restaurant industry, which contributes to 4% of total GDP. According to U.S. Bureau of Labor Statistics (BLS), food and beverage serving workers alone account for roughly 4.5 million jobs. During the pandemic, restrictions and concerns played an important role in the reduction of seated diners. Although take-out and deliveries compensated some of the loss, there are caveats. One of the key roles of on-premise dining is generating employment opportunities. Moreover, when people go out for dinner, they tend to spend money on goods and other recreational activities as well. During the pandemic, we have observed a couple of ups and downs reacting to the Covid situation. But since March this year, the number of seated-diners, according to popular restaurant reservation system, Open Table, stood quite stable at around the pre-Covid level. This stimulates the labor market and indicates the confidence of consumers.
Figure 5: Restaurant Dining
A more straightforward indicator of economic health is spending. Among all types of in-person non-bill payments, 31% is done with credit cards. Opportunity insights, a Harvard University research facility, releases credit card spending data on a monthly basis. In the chart, despite the existence of zig-zags, we see a clear upward trend since the trough in 2020. The 91-day moving average, which stands for the recent trend, is over 115% of the pre-pandemic level, just higher than the inflation rate. From this perspective, the economy is healthy.
Figure 6: Credit Card Spending
Grocery Store Shopping
One interesting alternative database is GPS location. Nowadays, people carry their smart phones everywhere they go. Among all places, grocery stores tell a lot about the economy. The less time people spent in grocery stores the less non-essential goods are consumed. From 2020 to 2022, we had three notable troughs associated with Covid-19 episodes. But since May 2022, the time spent in grocery stores has come back to where it was before the pandemic. This is a sign that interest on discretionary products is back again, further supporting the spending data.
Figure 7: Time spent on grocery stores
Our look at alternative data – from air travel to commuter traffic, from dining out to shopping in grocery stores – tends to side with the unemployment rate data rather than the real GDP view of the economy. That is, there is considerable evidence that the economy has returned to a healthy state following the pandemic shock. Activity is progressing on many fronts suggesting a steady- state growth path for the U.S. economy rather than an economy that is either rebounding from the pandemic as it was in 2021 or unusually fragile as suggested by the real GDP data.
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All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.