Federal Reserve Economic Data

The federal government passed the CARES Act in March 2020 to provide support for individuals and businesses affected by the pandemic. The spending associated with it was financed through the issuance of Treasury securities. And, over the course of the second quarter of 2020, the total public debt grew by $3 trillion, or 14%.

Despite this large increase in the public debt, interest payments by the federal government actually declined from $375 billion in 2019 to $345 billion in 2020.

The FRED graph above plots total public debt and federal interest payments as percentages of GDP beginning in 1970. Despite the increase in the debt-to-GDP ratio since 1970, interest payments as a percentage of GDP have not increased in tandem. In fact, from the mid-1980s to mid-1990s, interest payments as a percentage of GDP were nearly twice current levels.

The reason for this discrepancy is simply that the cost of servicing the outstanding stock of Treasury securities has declined. The FRED graph below shows the 10-year constant maturity Treasury yield (in blue), plotted alongside the federal funds rate (in red) and year-over-year CPI inflation (in green). To combat inflation during the mid-1970s and early 1980s, the Federal Reserve increased the federal funds rate, which in turn increased the interest expense of the debt. In early 2020, the Federal Reserve lowered its target for the federal funds rate and purchased substantial quantities of Treasury securities, which had the effect of lowering the interest expense of the debt.

As the Federal Reserve curbs its purchases of Treasury securities and contemplates increases in its policy rate to combat inflationary pressures, the cost of servicing the national debt is likely to rise. The macroeconomic consequences of such a development are difficult to forecast, since they depend on a variety of factors. The political consequences, however, are likely to manifest themselves as heated debates over the need for fiscal austerity measures.

For detailed discussions of the national debt, see Does the National Debt Matter? and How Much Debt Is Too Much?

How these graphs were created: First graph: Search FRED for “federal debt” and select “Federal Debt: Total Public Debt as a Percent of Gross Domestic Product.” From the “Edit Graph” panel, use the “Add Line” tab to search for “federal outlays interest” and select the appropriate series. From the “Format” tab, select “Right” for the y-axis position for Line 2. Second graph: Search for “10 year constant maturity” and select the monthly version of the “Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity” series. From here, as with the first chart, use the “Add Line” tab to search for the remaining series.

Suggested by David Andolfatto and Joel Steinberg.

We have a good idea about the number of new businesses being created because an essential part of that process is to apply for an EIN (Employer Identification Number) for tax purposes. The Census Bureau uses this information to publish weekly data on business applications. The FRED Blog used this data pre-pandemic to map new businesses by state.

The FRED graph above shows business applications over the past 15 years, and two aspects of the data are striking:

1. The regularity of seasonal variations through each year is impressive. In fact, one could confuse the graph with a cardiogram of a steady heartbeat.
2. Business formation becomes febrile after the pandemic-related recession. This erratic behavior is natural as an economy recovers, shedding weak businesses during the recession and regaining new ones in the recovery.

This second phenomenon may be stronger than usual this time around, as it appears that there’s some reorganization happening in the labor market. But the data are too recent to allow us to compare magnitudes across recessions at this point.

How this graph was created: Search FRED for “Business applications,” click on the link, and you’re in business.

Suggested by Christian Zimmermann.

The FRED Blog has tapped into Consumer Expenditures Survey (CES) data before, to track reading and smoking across different groups of consumers. Today, Dia de los Muertos, we use CES data to discuss life…and other insurance purchases.

The FRED graph above shows consumer expenditures on life insurance and other personal insurance for three age groups:

• mid-20s to mid-30s in green
• mid-40s to mid-50s in orange
• mid-60s to mid-70s in red.

We omit the in-between age groups to keep the graph uncluttered and emphasize our main points: Insurance purchases increase with age, and the oldest consumers are buying larger and larger amounts.

Income increases with age, so the fact that spending also increases with age is not surprising. This summary of the Survey of Consumer Finances shows that average household income is lowest when the reference person is 35 years or younger. The same survey also shows that income peaks between ages 45 and 54, so the increased insurance purchases by even older consumers is not exclusively driven by income.

The data above exclude health insurance premiums and illustrate a change in spending patterns brought about by a particular population cohort: those 57 years of age and older. These boomers were born within the time span of 1946 and 1964 and the youngest of them turned 57 this year. Over the past 20 years, they have spent, on average, as much on life and other personal insurance as consumers a decade younger.

And speaking of age: FRED turned 30 this April and is a bona fide millennial. FRED will surely be spending more time and attention on life and other personal insurance data in years to come.

How this graph was created: Search for and select “Expenditures: Life and Other Personal Insurance by Age: from Age 25 to 34.” From the “Edit Graph” panel, use the “Add Line” tab to search for and select “Expenditures: Life and Other Personal Insurance by Age: from Age 45 to 54” and “Expenditures: Life and Other Personal Insurance by Age: from Age 65 to 74.” To change the line colors, use the choices in the “Format” tab.

Suggested by Diego Mendez-Carbajo.