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The FRED® Blog

There’s electricity in the air! But it’s not for sale The production of electricity is outpacing sales

If you follow the energy sector, you know we’re living through interesting times. Energy sources are going through a slow but steady transformation: from traditional fossil fuels such as oil and coal to natural gas, wind, and sun. Given these changes, new companies are entering the energy production industry.

The graph above shows that electricity production in the United States has steadily grown; and, about 10 years ago, it plateaued. Electricity sales, however, have barely increased in the past decades. What’s happening? The divergence between the two measures is, to a large extent, due to more and more electricity production never hitting the market. Many firms and even households produce their own energy for their own use. This could be energy extraction from byproducts of production such as biogas or burning waste or running one’s own wind or solar farm. The recent flattening of electricity production reflects the fact that electricity demand is not increasing as it has in the past, thanks to improved energy efficiency all around. A major reason is also that the U.S. economy continues its natural evolution from energy-intensive heavy industry toward more specialized energy-efficient manufacturing and services.

How this graph was created: Search for “industrial production electricity,” select the two series, and click “Add to Graph.” From the “Edit Graph” menu, choose units “Index,” which should default to the starting date of 1972-01-01. Then click on “Apply to all.”

Suggested by Christian Zimmermann.

View on FRED, series used in this post: IPG22111S, IPN22112MS

The cost of owing How rising interest rates can affect the federal government's debt payments

Rising interest rates mean higher interest rates on debt payments, which means it becomes more expensive to buy a home, buy a car, or even go to college. It also becomes more expensive for the federal government to finance its debt.

As interest rates rise, payments on federal government debt also increase. The FRED graph above shows federal government expenditures with interest payments since January 1990: As federal debt has risen, expenditures on interest payments have also risen. These expenditures also depend on interest rate movements: When interest rates fall, payments decrease for the same level of federal debt. The Federal Reserve tends to lower interest rates during recessions, and this translates to lower payments, as seen in 2001 and 2008. (The gray shaded bars represent recession periods.)

Conversely, when economic conditions improve, the Federal Reserve tends to raise interest rates and this leads to higher interest payments. The second graph illustrates these two forces behind the movements in federal interest payments: The blue line is the secondary market rate on the 3-month Treasury bill, a measure of the federal government cost of borrowing that tracks very closely the interest rate set by the Federal Reserve (the federal funds rate). The red line is a measure of total public debt.

In principle, these two series can help us disentangle the main driving forces behind increasing interest payments. But doing this is more complicated than it sounds: The reason is that the federal government issues debt at different maturities, and the Fed typically sets only short-term rates. The behavior of interest rates at longer maturities depends on market forces and expectations of future inflation, among other factors.

How these graphs were created: For the first graph, search for and select “federal government expenditures: interest payments”; set the starting date to 1990-01-01. For the second graph, search for and select “3-month treasury bill: secondary market rate” (the monthly series); set the starting date to 1990-01-01. From the “Edit Graph” menu, select “Add Line.” Search for “federal debt: total public debt” and click on “Add data series.” From the “Edit Lines” tab, under “Units,” select “Index (Scale value 100 for chosen date)” and set that date to 1990-01-01. Then, under “Customize data” in the “Formula” field, type “a/100” and click “Apply.”

Suggested by Miguel Faria-e-Castro.

View on FRED, series used in this post: A091RC1Q027SBEA, GFDEBTN, TB3MS

Is the U.S. becoming less charitable? A brief analysis of tax returns

One may not feel very charitable while filing a tax return, but FRED data can at least help you understand something about charity in this country. The Internal Revenue Service provides some interesting statistics on how tax returns use various line items. The graph above shows two line items that can be linked to charity.

The first is deductible charitable contributions, which have declined since the mid 2000s, despite an increase along the way. Not everyone, though, can take advantage of these deductions, as taking standard deductions may be more advantageous. The second line item is the check box that asks whether you want to contribute a few dollars to the presidential election campaign. That item has been on an even more precipitous decline, independent of the political flavor of the president in office at the time. But with a little more than 4% of returns currently opting to make that contribution, this isn’t likely to be a meaningful indicator of philanthropic spirit.

How this graph was created: Search FRED for “tax returns”—which will provide plenty of interesting choices. Check the ones you want and click on “Add to Graph.”

Suggested by Christian Zimmermann.

View on FRED, series used in this post: IMZDCTC, RTNPECFC

Housing recoveries without homeowners: National trends

Historically, the cost of buying a house has been positively correlated with the percent of households that own their home. During 1996 to 2006 in the United States, both the price of houses and the homeownership rate increased. This increasing trend ended abruptly with the global financial crisis, which saw house prices plunge and drove homeownership rates to historically low levels. If homeownership became less attractive in the wake of the financial crisis, we might expect both prices and homeownership to decrease. Similarly, if the current increase in house prices were driven by people buying homes to live in, we might expect the homeownership rate to increase along with prices. However, recent evidence shows that house prices and homeownership are diverging.

The graph shows that, in the wake of the financial crisis, house prices declined by over 25 percent, from an index value of around 180 to around 135. The homeownership rate also dropped from a high of over 69 percent to just over 63 percent, its lowest level since 1980. Unlike in the past, the homeownership rate continued to fall even after house prices began to recover.

Several factors could be driving the decoupling of house prices and the homeownership rate. From the housing supply side, there is a trend toward decreased construction of starter and mid-size housing units. Developers have increased the construction of large single-family homes at the expense of other segments in the market. This limited supply, particularly for starter homes, could result in increased prices for those homes and fewer new homeowners.

There are also several factors affecting housing demand. The wave of foreclosures during the recession may have made people more wary about homeownership. Tighter credit conditions may have reduced access to mortgage credit, placing homeownership out of reach for many households. Real estate investors may be buying properties to generate rental income, simultaneously bidding up the prices of homes while also decreasing the supply of homes available to potential homeowners.

All of the above explanations likely contribute somewhat to the divergence of house prices and homeownership. However, any explanation must consider that this trend isn’t just limited to the United States. In recent years, house prices and homeownership have diverged in the United Kingdom, Canada, Germany, Spain, and the euro area.

Homeownership is part of the “American Dream” and a key tool for households to build wealth. In the years since the recession, though, fewer Americans have bought homes and increasing house prices have made homeownership less attainable. What this means for the economy in the long term is unclear.

How this graph was created: From the FRED homepage, select “Browse data by…Category.” Then select “Housing” under “Production & Business Activity.” Find and select the quarterly seasonally adjusted “Homeownership Rate for the United States” series from the results. From the “Edit Graph” menu, select “Add Line” and search for “house price index.” Select the seasonally adjusted “S&P/Case-Shiller U.S. National Home Price Index” series from the results and click “Add data series.” Finally, in the “Format” tab, select “Right” for the y-axis position of Line 2.

Suggested by Daniel Eubanks, Pedro Gete, and Carlos Garriga.

View on FRED, series used in this post: CSUSHPISA, RSAHORUSQ156S

Timing the market for tax purposes Realizing capital gains when tax rates are lower

If you’re a U.S. resident, you’ve probably already filled out your tax forms. (Unless you like procrastinating. In which case, you’ve got one month left.) FRED has plenty of data from the Internal Revenue Service that describe tax filings. Some series count the number of individuals filing and the amounts in various parts of their tax declarations. This graph shows the number of people declaring net capital gains. Clearly, the number decreased significantly when the stock market was doing poorly, but it was far from zero: The troughs were about half of the peaks. The reason is that only realized capital gains are taxed—that is, when a stock is sold. Even during the worst times, many of those selling their stocks were still realizing gains compared with the prices of the stocks when they originally bought them. And timing the sale of stocks may be to a taxpayer’s advantage if it allows him or her to benefit from lower marginal tax rates. Similarly, a prolonged stock market rally doesn’t necessarily translate into immediate additional capital gains…unless people sell their stocks during the rally. But periods of high income for taxpayers may not be the right time to sell stock if it pushes them into higher tax brackets.

How this graph was created: Search for “individual income tax filing” and click on the desired series.

Suggested by Christian Zimmermann.

View on FRED, series used in this post: NCGAGI


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