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Are we moving toward a cashless economy?

There’s a lot of talk that the U.S. is moving toward a cashless economy…at least in the sense that people are using more and more “plastic” (credit and debit cards) for transactions and that cryptocurrencies are becoming more popular. One test of this theory is to look at currency in circulation. If this measure stops growing while the economy is growing, it would be an indication that other forms of money have become more important and are serving as substitutes for currency. The graph above tells a different story: Currency in circulation is consistently growing more than the economy is. (Note: Both are nominal, not “real” inflation-adjusted measures). One caveat: U.S. dollars are also used quite a bit abroad. But dollar use abroad would have to increase much more than the U.S. economy for it to counteract a reduction in domestic currency demand. So it seems the question remains open.

How this graph was created: Search for currency in circulation and click on the series name. From the “Edit Graph” panel, open the “Add Line” tab and search for GDP. Do not select a real GDP measure! Take GDP in current prices. Change units to “Percent Change from Previous Year” and click on “Copy to All.” Finally, change the sample period to start in 1948.

Suggested by Christian Zimmermann.

View on FRED, series used in this post: CURRCIR

The unusual duration of unemployment

The scars of the Great Recession

The graph above shows the unemployment rate (right axis) and the average duration of unemployment (in weeks, left axis). It’s well known that the unemployment rate is currently very low. However, the duration of unemployment since the Great Recession has never been longer.* What’s going on?

The graph below has an answer. The share of long-term unemployment is significantly higher than in any other post-WWII period. Indeed, those unemployed for more than 6 months (in green) still represent over 20% of the unemployed, after a peak of over 45% in 2011. This share increases after recessions, but the most recent recession was deeper and much longer than the others. It’s also well-known that the long-term unemployed have a much harder time finding a job, leading to a catch-22 situation for them. And thus their numbers still persist at a high level.

How these graphs were created: Search for unemployment duration and click on the series name. From the “Edit Graph” panel, open the “Add Line” tab and search for “unemployment rate.” Open the “Format” tab and place the axis for the second line on the right. For the second graph, look at the notes for the duration series, where there is a link to the release table. From there, check the relevant series, click on and “Add to Graph.” From the “Edit Graph” panel, open the “Format” tab, change graph type to “Area, Stacked,” and finally move the “less than 5 weeks” series up so that they are all properly ordered.

*At least in the postwar era.

Suggested by Christian Zimmermann.

View on FRED, series used in this post: LNS13008397, LNS13025701, LNS13025702, LNS13025703, UEMPMEAN, UNRATE

Who pays what in federal taxes?

In principle, we all have to pay taxes. That includes individuals and corporations. The graph attempts to answer the question of how much each source provides in federal taxes. It’s clear that individuals pay the lion’s share (which doesn’t include social security contributions), and the second-largest source is corporations.

The third-largest source is tariffs on imported goods and taxes levied at production. Now, who precisely “pays” these types of taxes is more difficult to determine, as it depends on the price elasticities involved. Let’s say a tariff increases or a new tariff is imposed. Does the seller absorb it or does the seller roll it over to consumers through a higher price tag? The answer depends on how sensitive each party is to price changes.

The smallest source of taxes is the entities abroad category. These entities may be expats filing their income taxes or businesses with some ties to the U.S. that must pay taxes on their activities.

What are the overall trends? It’s clear that taxes from individuals have had a tendency to increase. Taxes from tariffs and such have tended to decrease, although they may soon go back up. Corporate income taxes have also decreased, proportionally, and are now very close to being overtaken by taxes from tariffs and such. Note also that corporate income taxes dip significantly during recessions: These taxes are mostly based on profits, and profits don’t usually rise during downturns. Finally, taxes from foreign entities are small but have recently started to become noticeable.

How this graph was created: Search for “federal tax receipts” and click on any of the relevant results. Scroll to the bottom of the note and click on the release table. Check the series you want and click on “Add to Graph.” Because the latest taxes on corporate income weren’t yet available as this post was being written, we adjusted the date to remove the last quarter. From the “Edit Graph” panel, change type to “Area” and units to “Percent.”

Suggested by Christian Zimmermann.

View on FRED, series used in this post: A074RC1Q027SBEA, B075RC1Q027SBEA, W007RC1Q027SBEA, W008RC1Q027SBEA


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