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Employment for video tape and disc rental

Video killed the radio star and the internet killed the video store

Slowly changing consumer preferences have decreased the demand for goods, and data in FRED show this trend. Today, we explore how a change in consumer preferences and internet-based technology have affected the economic activity of video rental stores.

The FRED graph above shows Bureau of Labor Statistics data on the number of persons employed in video tape and disc rental establishments between 1987 and 2022. These data are divided by the number of persons employed in all types of consumer goods rental, multiplied by 100 to show it as a percent.

Video rental employment peaked in 1990 at 59% of all rental employment. That has steadily declined, and the latest data at the time of this writing puts that employment share at less than 3%. Let’s break it down.

Between 1987 and 2022, overall employment in rental establishments (excluding video rental) actually increased. So while consumer preferences for renting goods didn’t wane, demand for physical video rentals did. Video rental stores closed and their employment shrank as video streaming over the internet became a convenient alternative to a trip to the video store. It also eliminated late-return rental fees!

In “Video Killed the Radio Star,” The Buggles lamented that “we can’t rewind, we’ve gone too far… Put the blame on VCR.” That was 1979, a signal moment for video surpassing radio. But their lyrics may also apply to some big changes today: “They took the credit for your second symphony, rewritten by machine and new technology, and now I understand the problems you can see.”

How this graph was created: Search FRED for and select “Employment for Real Estate and Rental and Leasing: Video Tape and Disc Rental (NAICS 532282) in the United States.” From the “Edit Graph” panel, use the “Edit Line” tab to customize the data by searching for and adding “Employment for Real Estate and Rental and Leasing: Consumer Goods Rental (NAICS 5322) in the United States.” Last, type the formula (a/b)*100 and click “Apply.”

Note: This change in consumer preferences has led to a change in the name of the price index data series tracking spending on video-related recreation: In 2023, that series was renamed “Cable, satellite, and live streaming television service.”

Suggested by Diego Mendez-Carbajo.

Banana prices

A nod to xkcd and Arrested Development

“It’s one banana, Michael. What could it cost? $10?”

Randall Munroe’s xkcd webcomic recently referenced FRED in a wonderful infographic that responds to the above question from the “Arrested Development” sitcom. Basically, an oblivious wealthy character reveals they have no clue how much things cost.

The infographic starts with FRED price data to make some projections about how far into the future you’d need to go for a banana to actually cost $10. And when art imitates (FRED) life, the FRED Blog notices!

So we respond to this same question with the help of FRED’s friend ALFRED,* constructing a graph of banana prices that uses data series from the BLS and the FOMC: the annual average price of bananas between 1980 and 2023 (blue line) and the projected annual value of the PCE price index for 2023 to 2026 (red line). The custom dotted vertical line marks the end of the historical record and the start of the estimated projections.

The graph stops at 2026, the last value at the time of this writing of current FOMC projections. The price data go from 8.5 cents in 1980 to 15.7 cents in 2023 and are projected to reach 16.2 cents in 2026. At a PCE price index inflation rate of 2% (the FOMC’s inflation target), it will take 210 years for a banana to reach a price of $10.

How this graph was created: In ALFRED, search for and select “Average Price Bananas.” From the “Edit Graph” panel, use the “Edit Line 1” tab to enter the formula a/4 to customize the units from dollars per pound to dollars per banana. We used data from the US Department of Agriculture to calculate how many bananas, on average, make a pound: 1 Lb. = 453.6 grams; 453.6 grams per pound divided by 115 grams per banana is approximately 4. Use the “Add Line” tab to search for and add “FOMC Summary of Economic Projections for the Personal Consumption Expenditures Inflation Rate, Central Tendency, Midpoint.” Type the formula (0.637/4)*(1+(a/100)) to calculate the future price of a banana, matching the median projected value of inflation estimated by the FOMC. The projected 2023 price doesn’t align with the average 2023 price reported by the BLS because the projected price is calculated as the reported 2022 average price ($0.637) inflated by the projected 2023 growth in the PCE (2.8%).

* We use ALFRED here because it’s static in time, while FRED updates with the newest data. When the next summary of economic projections is released by the FOMC, an updated FRED graph in this post would create a cognitive dissonance with the post’s static text.

Suggested by Diego Mendez-Carbajo.

Household net worth, “excess savings,” and inflation since the pandemic

Recent research has connected fiscal policy during the pandemic with subsequent inflation. One common piece of evidence is the close relationship between “excess savings” and inflation in recent years. Some of our friends around the Fed discuss this in more detail: Fernando Martin, Hamza Abdelrahman and Luiz E. Oliveira, and Omar Barbiero and Dhiren Patki.

These studies calculate the level of excess savings by adding up all the savings during the pandemic that deviate from the pre-pandemic trend. Here, we use an alternative measure of household savings that also considers changes in asset valuation and leverage: specifically, the difference between household total assets and total liabilities, known as household net worth. FRED gets the relevant data from the US financial accounts published by the Board of Governors of the Federal Reserve System.

One advantage of using household net worth is that it considers the value of housing wealth, or home equity. This component of household wealth is crucial—and maybe even more so in this period because of the significant increase in house prices, which implies a considerable increase in housing wealth.

The FRED graph above shows the evolution of household net worth (divided by the level of disposable personal income to represent its relative size) and the annualized quarter-to-quarter PCE inflation rate.

Our graph confirms the close connection between household savings and inflation during this period and shows that, in the third quarter of 2023, household wealth remained above pre-pandemic levels.

How this graph was created: Search FRED for and select the “household net worth” series. From the “Edit Graph” section, use the “Edit Line 1” tab to search for and add the “disposable personal income” series. Apply formula 100*(a/(b*1000)) and click “Apply.” For the second line, open the “Add Line” tab, search for and select “PCE Index” and apply formula 100*((1+a/100)^4-1). (For consistency, we multiply disposable personal income by 1000, we annualize the quarter-to-quarter percent change in PCE, and we multiply both indicators by 100 to display them in percent.) Finally, use the “Format” tab to move the y-axis for the first line to the right side and start the sample period in 2016.

Suggested by Masataka Mori and Juan M. Sánchez.

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