The Economic Stress Index for the second quarter of 2021 was -8.48. The lower the index, the better the economy is. For example, for all of year 1999 during the tech boom, the Economic Stress Index was 0.0, while for all of 2009 - during the aftershocks of the Great Recession - the ESI averaged 19.39.
Underemployment (the U-6) averaged 9.9 in the three months ending with the June 2021 jobs report which was released early July 2021. Gross Domestic Product (“The Economy”) was 12.1% higher in the second quarter compared to the same quarter a year earlier. Total Disposal Personal Income minus government money such as Social Security and Unemployment, was higher by 6.28 percent. The strong growth in GDP and Income reflects a big change from the same time last year when the economy was largely in lock down.
Economic numbers that reflect a bad part of the economy (such as Underemployment) add to the Economic Stress Index. An economic number that reflects a good part of the economy (such as a rising GDP) reduces the ESI. Therefore, the Economic Stress Index for the Second Quarter 0f 2021 adds up as follows:
9.9 is the base number to reflect the average 9.9% Underemployment Rate in the last three months.
12.1 is subtracted to reflect the year over year 12.1% gain in the GDP.
6.28 is subtracted to reflect the year over year 4.37% drop in Disposal Personal Income.
-8.48 is the ESI for 2021 Q2.
The Disposal Income for this report is line 36 of table 2.6 of the national income and product account from the BEA.
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) and also those who have part time jobs because they can’t find full-time jobs due to the state of the economy. This is basically the broadest measure of the unemployment picture in the US. 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 full 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 such as social security payments. The report is released monthly by the Commerce Department.)