The Trash Index: The Latest -- and Best? -- Economic Predictor

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Trash index
Economics is known as the "dismal science" -- an often-grim analysis of numbers and trends that reveals the hidden workings of society. But when it comes to making predictions about the future, the dismal science occasionally veers dangerously close to superstition. From the hair index to the hemline index, the skyscraper index to the men's underwear index, the business pages are full of tools that analysts have used to understand where the economy has been and guess at where it's going.

One of the most recent attempts is the "Trash Index," developed by economist Michael McDonough. His index explores the relationship between the gross domestic product and the number of train cars full of trash that are shipped to landfills. When the economy is booming, there are plenty of trains, but when it's in trouble, the flow stops.

Accurate, but in Which Direction?

Fundamentally, the trash index makes sense. After all, when a family buys a new couch, they often throw out the old one; ditto when developers construct new buildings. Much of this refuse makes its way to landfills. According to Bloomberg, the index is incredibly accurate -- between 2001 and 2010, there was an 82.4% correlation between flow of trash and the economy.
The trouble is, while the peaks and valleys of the trash index echo the ups and downs of the economy, they don't always match up. Sometimes the trash index moves before the GDP, giving a hint about where the economy is headed. Sometimes it follows the GDP, showing where the economy has been. Right now, for example, the trash index is moving sharply south, suggesting that the U.S. may be headed into a steep recession. The question, of course, is whether GDP will follow.

The Trash Index and Job Creation

Regardless of its predictive ability, one of the trash index's most interesting aspects is the direct relationship that it suggests between consumption and the economy. While much has been made of "job creators," the economic titans who allegedly carry America's future on their shoulders, the trash index suggests that the real job creators might be the middle class. After all, when the middle class fills its homes with products and railcars with trash, they are effectively creating jobs. On the flip side, when they sock away their dollars, the trash trains slow down and the economy suffers.

With the fiscal cliff looming, the question is whether the middle class will keep fueling the economy or start squirreling away money in preparation for tough times. For now, at least, the trash trains seem to suggest that a storm is on the way -- and the real job creators are keeping their money in their pockets.



Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.

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Setanta

again lunatic states scatology

Bush ADMINISTRATION SUPPORTS NEW TAX BREAKS FOR COMPANIES MOVING OFFSHORE: After the WTO prohibited a U.S. provision "shielding companies' overseas blah blah blah BARF
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
BUUUUUUUUUUUUSH ?
uuuuuuuuh hellO,it's 2012 and the diMs REMAIN the majority in the senate never mind you have obummmer at the helm-
so whatTHE#$!k does buuuuuuuuush have to do WITH ANYTHING HAPPENING since the messiyuh took over ?

August 27 2012 at 11:26 PM Report abuse rate up rate down Reply
Setanta

teapartyiscrazy
Resolved QuestionShow me another »
Why did Bush give tax cuts to companies that outsourced?
GOP is the party of outsourcing..

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
OK--why did obummer give taxpayer handouts to bs companies that couldn't even MANAGE finances or the MARKET FOR THEIR CRAPPY products ?
why did obummer give taxpayer money to GE which relocated and then APPOINT GEs ceo as a job czar ?
why DOES obummer refuse to admit what he is ?
why hasn't obummer explained away his social security number ? all his NAMES ? even stanley ann ??
etc

August 27 2012 at 11:23 PM Report abuse rate up rate down Reply
M

This is OLD info, but it fits in with this topic.

My home town decided to sponsor clean-ups of homes, apparently to prevent infestations by mice, etc.. Trash put at the street curbs was given free disposal twice a month, with no limitations. Not having anything better to do at the time, several kids my age rode our bicycles around the area, looking at the piles in front of nearly every house as attics, basements, and garages were cleaned. Some of the 'trash/treasures' included coffee percolators, older sewing machines, fans, radios, and the like, most actually worked; presumably replaced by drip coffee makers, and the latest models.

In our young minds, questions began to form. One occurred to all of my group; if our neighbors were disposing of working items, what would we find in the more affluent neighborhoods? We got our answer after a lot of miles on our bicycles; in the boxes and bags at the curbs in front of the very nice houses, we found old newspapers and lawn clippings. Did they have no items for disposal? Apparently not...

Another question formed; Were any of the working appliances being donated to charity? Clothing must have been since there was none at the curb.
After that, our bicycle baskets were loaded with goods on their way to charities...

August 26 2012 at 6:28 AM Report abuse +2 rate up rate down Reply
BABIN

Well…if we have at least 51% Americans who bought a house before 15 years and until this day he pay off that house I mean for real pay off with monthly payments NOT resell for anyone who use again credit to bought that house…
If we have at least 51% Americans who use C.C. monthly and paying off in full balance every month…
If we have at least 51% American who pay off own car in 2 year time…NOT in 5 or 6 years time…
If we have at least 51% American (one person NOT family) who work yearly for salary around $40.000 AFTER all deductions taxes and so on…(I think that amount of the money one person need in here to live ‘’normal’’ life…)
Well…we don’t have any of that…why…?....because 3% to 4% rich guys take over our ‘’perfect’’ system in own hands and we still just looking what is going on and vote for the same again and again and again…how in God sake that small % guys can rule above all rest of us…?...is look to me likes Communist system with only different name…AMEN……

August 26 2012 at 4:20 AM Report abuse rate up rate down Reply
1 reply to BABIN's comment
Get real.

You had everything right until your last sentence. Communism is the EXACT OPPOSITE of the problems you are bemoaning. You should add to your list the pathetic American educational system that brainwashes you into equating "Communism" with anything bad. The problem is CORPORATISM, which is the driving force of fascism - and that's almost 180° away ideologically from Communism, in which every resource is owned by the public and shared equitably. There is no unemployment or shortages of any basic need in Communism. There are no homeless people in Communism. Who suffers the most? The top 1%, who's wealth is wrenched from them by force and distributed among the population. Is THAT what you see happening in America today? Because I see the exact opposite - the poor losing more and more money and rights every day.

August 26 2012 at 4:43 AM Report abuse rate up rate down Reply
1 reply to Get real.'s comment
goodhealth4you

You have got to be kidding! Have you ever known anyone who lived under communistic rule? I have! They had NO rights whatsoever and they were watched constantly. They had to be careful where they went, what they said, what they had - and they could not even take pictures! Someone was always following them & watching them. If they came into your home (which was the norm to check up on you) and you had one little thing that everyone else didn't - you got in trouble & they took it away. Any kind of worship was done underground. No one was happy because everyone was like a robot - doing the same thing, not able to better themselves. That's why communism fails! People need to be able to try & better themselves if they want to. There are those lazy people that don't care about that, but most of us want to better ourselves to become the best version of ourselves! And yes - if I work real hard to improve my family's standard of living, you bet I want to keep it & not have it given away to people who don't work any harder than they have to. It's their right to do so, and my right to do as I do, too! And don't you think Big Brother who watches over all the others - those in government positions - have more than everyone else? They're the rich ones! You're not going to get away from greed. At least in this country people have the right to better themselves IF THEY WANT TO! And no one is starving. If they are, it's also their choice, because there are soup kitchens & food pantries at almost every church in this beautiful country of ours! Then there are LINK cards, government subsidized buildings & many other kinds of help for people if they want it. If you want to live under a communistic rule - find another country to live in! Stop trying to change the best country in the world!

August 26 2012 at 6:07 AM Report abuse -2 rate up rate down
lhte

I've been in the family trucking business all my life. Trucking is one of the earliest, (if not the best) indicator of which way the economy is trending. It has cycles based on the time of year and comparisons year-to-year are easily tracked. We've been in a downward trend since 2008, but 2012 has been the worst year in many years, even without factoring in the (roughly) 24,000 trucking companies that have gone out of business since 2008.

Oddly enough, oil prices are trending opposite of the demand. Worldwide inventory of oil is far above the average, yet prices continue to trend upward while demand continues to drop. The only reasonable conclusion is speculators are driving the price up simply because there aren't any lucrative alternatives for profit out there since all other economic indicators are pointing to an imminent crash.

The media has largely ignored the looming depression. Would it be different if a Republican occupied the White House? I surmise they intend to maintain the facade of a false "recovery" to lend all possible aid to the campaign of the current resident of the White House. This election is crucial in that it will determine the depth and length of the coming depression, and the perception of how and when America will (or will not) recover from it.

We are in serious financial trouble, folks. It's time for somebody to admit that "the Emperor Has No Clothes" and take the necessary steps to turn this great ship of America around before we are run aground with no hope of restoration.

Quit ignoring the "DEAD END" signs and put on the brakes! There IS a cliff at the end of this road we are on!

August 26 2012 at 3:19 AM Report abuse +6 rate up rate down Reply
2 replies to lhte's comment
dovch1

Interesting comment and analysis. Thank you for sharing.

August 26 2012 at 4:03 AM Report abuse +2 rate up rate down Reply
M

Would it not be true that offshoring manufacturing industries and jobs has also removed the need for trucking raw materials, parts, and energy sources used by manufacturing?

I do not have figures or references, but that certainly HAS to be part of the decline in trucking needs. Trucking of finished goods is obviously still in progress, only now it starts at the ocean ports instead of the now-empty factories...

August 26 2012 at 6:44 AM Report abuse rate up rate down Reply
lindah3159

Maybe more of us have discovered how to re-cycle. My family uses Freecycle.com and Craigslist to re-home larger items. Any surplus of food we simply give away to food banks or friends and neighbors.

August 26 2012 at 2:39 AM Report abuse -1 rate up rate down Reply
Yanni N Sarah

Definitely don't buy the trash thing...but it's looking more and more as if Obama will be a one-termer.

August 26 2012 at 2:35 AM Report abuse -1 rate up rate down Reply
nikkitytom

I'm ordinary middle class ....actually lower middle class if i read the stats .... and I live decently and comfortably. When I came to America over twenty years ago, I was appalled by the wasteful spending and the huge amount of debt my friends carried. The idea of amassing debt for items like fancy shoes and handbags and eating out just stunned me. I drive a thirteen year old car given to me by an ex. I buy my clothes at Ross and on sale ... but choose carefully so I dress very well. I buy fruit in season and stock up on sale items.

But my life is incredibly rich. I can download from the amazing Petrucci Library, over 45,000 free scores of my beloved classical music which I play on second hand 60 year old ... but superb ... piano. I have all the gadgets I need for graphic design ... some like the fabulous GIMP are free ... others like my Wacom tablet i bought. I have Amazon for books ... at rock bottom prices ... if I can't find them at the library. I have several Wordpress blogs ... fantastic editing tools ... Online Education is a truly inspiring thing because there are thousands of people eager to share their expertise ... for FREE. I've learned everything from how to manage a gaussian curve to fill the ink in a programmed printer. Another cost cutter.

When our values shift ... out of necessity for many ... then alas, we will see a downswing in the economy. We have to adapt. It has nothing to do with President Obama. It's a paradigm shift in values. We have been gagging on our excesses for the past thirty years .... we haven't found happiness in our wild spending sprees ... we've ruined our health and taste buds by gorging on 1/2 pound burgers and 32 ounce sodas. We even ruined our sex lives with excess. We're sated and satiated to the point of numbness.

Change is coming. Another turn in evolution. Either we change and learn what real values are ... or we will destroy ourselves. And we cannot hide behind religion and platitudes ... we cannot endlessly meddle in each others lives ... personally and as nations. We have to find contentment in ourselves.

And that WILL indeed impact economy. But learning to live with less and to share with each other would be an admittedly idealistic solution.

August 26 2012 at 2:35 AM Report abuse +3 rate up rate down Reply
johnarack1

Excellent Post Sprftk :)

August 26 2012 at 1:47 AM Report abuse -3 rate up rate down Reply
sorftk

Bruce Watson, you sir 0ne-hundred percent inncorrect in placing the trash problem on President Obama. Then you have the audacity to blame the middle class for the mole hill into a mountain. The flamboyant ways those with money spend on their lavish business trips, expensive homes, their housekeepers, nannies, chaufers, privet jets, yachts with working crews. Over extends the boundries of which you speak. If we all take a look at our ENVIRONMENTAL FOOTPRINTS, and I do mean all of us. You will find the mystery of which you speak. Many of the middle class are reparing their vehicles, reappolstering their furniture, segrgating their trash waste, and manicuring their own yards. Doing their own home repairs and enjoying the world close to them. Our cities, our wonders of the world, in our own back yards. Saving when we can and spending when we have to.

Do you remember the 9/11, horror that shook the world? Our then President Bush, (whom I have great respect for), repeatedly addressed the American Public, asking us to spend money to rebuild our country, to show the world we are strong.

I'm just a common man who does his best to deal with hipocrates of the world. I'm just me. I did not for President Obama, because of the media hype. Now I know that I was wrong, and with that said. I will vote for President Obama to run his next term and continue his quest to help not just the middle class, but all of the United States.

August 26 2012 at 1:11 AM Report abuse -2 rate up rate down Reply
2 replies to sorftk's comment
bandy4321

Those so called flamboyant rich actually support the working class by spending lavishly by keeping them employed. Obama is out to destroy this country and it will end up destroying the middle class. The middle class portion of our society has lost their money..everything is getting expensive..oil, food, etc etc etc. Obama wants us to be more like Europe. Every portion of society will suffer. Is that what you want?

August 26 2012 at 4:35 AM Report abuse +1 rate up rate down Reply
Norma

Sucker

August 26 2012 at 12:06 PM Report abuse +2 rate up rate down Reply