Federal Reserve Economic Data

The FRED® Blog

Capacity utilization rate and the business cycle

The industrial capacity utilization rate is defined as the percentage of resources already installed or paid for by firms, such as capital and labor, actually used by corporations and factories to produce goods. This rate tends to move along with the business cycle: increasing during expansions, when companies are trying to produce more goods to meet demand, and declining during recessions, when demand for goods declines. And as the graph shows, the historical trend of total capacity utilization has been declining, as has real GDP growth.

Indeed, the average capacity utilization rate between 1967 and 1979 was around 84 percent, it declined to 81 percent between 1980 and 1999, and dropped down further to 77 percent between 2000 and 2016. Similarly, average GDP growth fluctuated around 3.3 percent between 1967 and 1999 and declined to around 1.9 percent in the period between 2000 and 2016.

How this graph was created: Select “Real GDP” from the “At a Glance” menu on the home page. Go to “Edit Graph” and under the “Add Line” panel search for “Capacity Utilization: Total Industry” and add it as a new line to the graph. Then, format Line 2 to be on the right y-axis position and change the line style to dash. Finally, select the desired date range.

Suggested by Maria Arias and Yi Wen.

View on FRED, series used in this post: A191RL1Q225SBEA, TCU

Employment in coal

Coal has been in the news lately—specifically, coal mining jobs. Let’s take a look at what FRED can show us about coal mining employment among U.S. states. For starters, half of U.S. states don’t mine coal. Of the 25 that do, 10 have only a handful of mines and many other states have so little employment in that industry that the Bureau of Labor Statistics doesn’t separate coal mining from other mining activities.* In the end, we have a precise data series for only three coal-producing states.

It turns out these three series are enough to show that coal mining employment has differed among states. Employment has trended down since the start of the series (in 1990) in both Kentucky and Pennsylvania. But Wyoming has no such downward trend; in fact, there’s been an uptick in recent years, except for a marked decrease in 2016. Why the difference? Coal from Pennsylvania and Kentucky has a much higher SO2 content, which is costly to remove during the burning process. So coal-fired power plants prefer to use the less-polluting coal from, say, the state of Wyoming (not to be confused with the coal-rich Wyoming Valley in Pennsylvania). But with the boom in shale gas extraction and the lower cost of natural gas (and other alternative fuels), even Wyoming coal is becoming less competitive. We’ll see what the future holds for this industry.

*Per the U.S. Energy Information Administration, the top five U.S. coal producers in 2015 were Wyoming, West Virginia, Kentucky, Illinois, and Pennsylvania. The BEA offers employment data for West Virginia and Illinois only for all forms of mining plus logging.

How this graph was created: Search for “coal employment” and select the three series. Click on “Add to Graph.”

Suggested by Christian Zimmermann.

View on FRED, series used in this post: SMU21000001021210001SA, SMU42000001021210001SA, SMU56000001021210001SA

Investing in FRED

FRED doesn’t provide advice on how you should invest your savings. Different circumstances warrant different portfolios; and, as we often hear, past performance is no guarantee of future results. But FRED can show how various forms of investment have performed over the past 40 years or so. Here, we compare stocks, gold, and real estate.

  • Stocks. There are many different stock indexes, but the Wilshire 5000 index is the most comprehensive. It shows the value of a portfolio of stocks with the dividends reinvested in that portfolio.
  • Gold. It doesn’t really matter which price index you use because they’re all very similar in the long run and there’s no dividend to account for.
  • Real estate. This is tricky, so we use two series: The Case-Shiller house price index captures the value of the house itself but not the (implicit) rent from it that could be reinvested in the same way dividends can be reinvested for stocks. The Wilshire index dedicated to real estate funds (REIT) does account for reinvestment.

The graph shows that, in the long-run, stocks and real estate are quite similar. But gold clearly lags and is similar to owning a house but not living in it or renting it out. Of course, in the short run, things can look different from this long-run picture and individual stocks or houses could perform differently from the big indexes.

How this graph was created: NOTE: Data series used in this graph have been removed from the FRED database, so the instructions for creating the graph are no longer valid. The graph was also changed to a static image.

Suggested by Christian Zimmermann.

View on FRED, series used in this post: CSUSHPINSA, GOLDPMGBD228NLBM, WILL5000IND, WILLREITIND


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