Federal Reserve Economic Data

Gross domestic product (GDP) is the sum of all incomes distributed in a year, including disposable personal income (DPI). So, GDP and DPI are positively correlated. That is, they generally move in the same direction and follow each other closely.

Our FRED graph above shows this correlation, with one striking deviation at the point of the COVID-19 pandemic. What’s behind this deviation? A third measure, personal current transfer receipts, can help explain.

The US government increased transfers to households in such large proportions during the pandemic that DPI growth actually increased even though GDP growth decreased.

GDP and DPI

Prior to 2020, GDP and DPI show a clear positive correlation. During recessions (shaded areas in the graph), the growth rates of GDP and DPI decreased. The correlation also holds outside recessions: During the recoveries after the 1981-82 and 2007-09 recessions, the growth rates of both GDP and DPI increased.

From 2020 to 2023, however, the two series behave quite differently: GDP’s growth rate decreased while DPI’s growth rate increased.

DPI and Transfers

Although GDP and DPI are closely related, there’s a difference between them: DPI includes government transfers to individuals, which is captured by the thin red line in the graph. And it’s these transfers that explain the change in the behavior of GDP and DPI in 2020.

Our second FRED graph, above, zooms in on the period of the COVID-19 pandemic. The US government sent transfer payments to households to alleviate the severity of the crisis. In the second quarter of 2020, transfers increased substantially and so did personal disposable income, despite the fact that GDP growth had gone negative.

The growth rates of transfers and PDI then generally declined and went negative in the first quarter of 2022, despite the fact that GDP growth had been positive. By 2024, the rates were aligned once again.

Why was 2020-23 so different?

The US government has increased transfers to households before to alleviate the severity of crises. For example, the first graph shows an increase in transfers during the 2007-09 recession. So why did DPI growth actually increase during the COVID-related recession, but in no other recession?

The increase in transfers in 2008 was only 25%, compared with 75% in 2020 and 89% in 2021. Those are proportions not seen before.

How these graphs were created: Search FRED for and select “GDP.” Click on “Edit Graph,” open the “Add Line” tab, and search for and select “DPI.” Add another line search for “PCTR.” Open the “Edit Lines” tab and choose quarterly frequency and “Percent Change from Year Ago” units for each line. From the “Format” tab, choose the right axis for the third line (PCTR). For the second graph, start the sample period in 2020 Q1.

Suggested by Guillaume Vandenbroucke.

The current softening in the labor market is hitting recent college graduates especially hard, suggesting the traditional college premium may be weakening. At least for quickly landing a job. In this post, we take a longer view of the unemployment gap between college graduates (with a bachelor’s degree or higher) and high school graduates (with no college).

The graph shows a persistent and significant disparity between the two unemployment rates: From 2000 to 2025, high school graduates consistently faced unemployment rates at least 2.3 percentage points higher than those for college graduates. This enduring gap reflects structural differences in the types of jobs each group holds: College-educated workers are more likely to have jobs that are less susceptible to cyclical layoffs and economic disruptions.

The gap is most pronounced during economic downturns.

During the Great Recession (2008-2010), the unemployment rate gap between workers with and without college degrees spiked dramatically, to about 7.8 percentage points. We see a similar pattern during the COVID-19 pandemic in 2020. This pattern highlights the greater vulnerability that less-educated workers have to economic shocks and suggests that higher education provides both access to better employment opportunities and greater job security during recessions.

The gap shrinks but persists in times of tight labor markets.

In tight labor markets, the gap narrows significantly but never disappears. During the long recovery of the 2010s, as the labor market improved, the gap gradually shrank to just above 2 percentage points. A recent FRED blog post shows that the unemployment rate gap for young workers disappeared altogether during the first months of post-pandemic recovery and has remained at historically low levels since then.

Higher unemployment can have lasting effects.

The lack of job security for workers without college experience can lead to lower wages and lower lifetime earnings, as frequent job losses interrupt career progression and skill development. This educational divide in employment outcomes underscores the economic value of higher education in the American labor market.

How this graph was created: With data graphing tools in FRED, we’re able to subtract the unemployment rate of college graduates from the unemployment rate of high school graduates and graph a single data series. Search FRED for and select “Unemployment Rate – College Graduates – Bachelor’s Degree and Higher, 16 years and over.” From the “Edit Graph” panel, use the “Customize data” field to search for and add “Unemployment Rate – High School Graduates, No College, 16 years and over.” In the formula section, type b – a. Under “Modify Frequency,” choose “Semiannually” and keep the “Aggregation Method” as “Average.”

Suggested by Serdar Ozkan and Nicholas Sullivan.

How do prices change over time?

Prices tend to go up, especially over long periods. But some prices can increase much faster than others and some can even decrease. Over the past 40 years or so, price changes for goods have tended to be lower than price changes for services.

Our FRED graph above uses data from the consumer price index release table to track price changes for some specific goods. The average CPI, shown by the solid blue line, is noticeably higher than the values for all the specific goods listed in the graph.

Our FRED graph below tracks price changes for some specific services. The average CPI, shown by the same solid blue line, is noticeably lower than the values for all the services listed in the graph.

Why are price changes for goods below average?

Increases in quality and productivity have allowed for slower increases in the prices of many goods and even some actual price declines.

The quality of cars has improved considerably. These enhancements have to be factored-out to get a genuine apples-to-apples price reading that can be compared over time.

For example: If you pay $35,000 for a car today and 8 years ago you paid $25,000, then the difference in purchase price is $10,000. But consider this: You’re also getting the most modern features with your new car, such as automatic emergency braking and keyless entry with biometric access. Those features weren’t available when you bought your previous car. So, because you’re getting much greater value with this purchase, the adjusted CPI price increase would be much less than $10,000.

The same applies to computer equipment, which wasn’t even a consumer good in the early 1980s.

Productivity in manufacturing has also improved considerably. Apparel, toys, and car parts, for example, can be produced much more efficiently or in lower-cost locations than before. As engineers find more efficient ways of making things, those things become (relatively) cheaper.

Why are price changes for services above average?

It is much more difficult to improve productivity for services than it is for goods, so services have gotten much more expensive. Consider education and medical care, for example. You cannot successfully increase classroom size beyond some point, and you cannot put more patients in a single hospital bed. Another example is the barber: Technology improvements in hair cutting have been very limited, and barbers still serve roughly the same number of customers each day as they did 40 years ago.

Of course, the rise of artificial intelligence may create new trends for some services. A topic for another day.

One more thing to know about the CPI

A good that has actually gotten much more expensive over time is tobacco products. These products have had increasingly higher taxation for several decades, with the intent to reduce their consumption. Helpfully, the CPI accounts for taxes when it calculates price changes.

How these graphs were created: Start from the CPI release table noted above, which you can find in the notes for the CPI graph or any of its components in FRED. Check the series you want displayed. Click on “Add to graph.” Change the start year to 1983.

Suggested by Christian Zimmermann.