The Economic Stress in June 2020 was at 34.94 which is a spike from the 2.42 average for all of year 2019.
The lower the index, the better the economy is. For example, for all of year 1999 during the tech boom, the ESI was 0.0 which was the best year on record dating to 1973. For all of 2009 during the aftershocks of the Great Recession, the ESI averaged 19.39; a record high which will likely be broken for all of 2020.
Underemployment (the U-6) averaged 20.46% in the three months ending with the June 2020 jobs report which was released early July. Gross Domestic Product (“The Economy”) was 9.54% lower in the last (second) quarter compared to the same quarter a year earlier. Disposal Personal Income minus government money such as Social Security and Unemployment, was lower by 4.94% in the last three months compared to the same three months a year earlier.
Economic numbers that reflect a bad part of the economy (such as Underemployment or a loss in Household Income) adds to the Economic Stress Index, and an economic number which reflects a good part of the economy (such as a rising GDP during a recovery) reduces the ESI. Therefore, the Economic Stress Index for June 2020 adds up as follows:
20.46 is the base number to reflect the average 20.46% Underemployment Rate in the last three months.
9.54 is added to reflect the year over year 9.54% drop in GDP.
4.94 is added to reflect the year over year 4.94% drop in Disposal Personal Income.
= 34.94 which is the ESI for June 2020.
The U-6 counts the regular unemployed (known as the official Unemployment Rate or U-3), plus those marginally attached to the workforce (halfway looking for jobs), plus those who have part time jobs because they can’t find full-time jobs due to the state of the economy. The monthly Economic Stress Index uses a rolling 3-month average of the Seasonally Unadjusted U-6.
The percent change in GDP of the latest quarter compared to the same quarter a year earlier. In the Annual section it is the annual percent change in GDP (Gross Domestic Product) of the current year compared to the year before.
We look at the year over year change in Disposal Personal Income for the monthly report and at Household Income by the Census for the annual report. The monthly report looks at a three-month average, such as this year’s fist quarter compared to last year’s first quarter, while the annual report compares the full year-over-year change. (Until 2020, we used the monthly Household Income data from Sentier Research for the monthly report. However, Sentier stopped releasing it so we are using Disposal Personal Income minus government transfers which is released monthly by the Commerce Department.)