Joe Sixpack's Situation In 2Q2017: The Average Joe Is Better Off

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The Joe Sixpack Index

The Joe Sixpack Index is a composite index of home prices and wage income (again - Joe owns a house with a mortgage, has a job, and no other assets). This index was designed to measure how rich Joe should feel. The theory is that the richer Joe feels, the more Joe will spend.

  • The data in this index is only updated every three months, and the data was updated with the release of the Federal Reserves Z.1 Flow of Funds.
  • It is inflation and population adjusted.
  • Currently, Joe has a house that is increasing in value - and his income in inflation terms is growing - so the net affect is that the index improved - and now indicates Joe feels richer than he did in the last quarter. Note that the rate of increase is now improving.

Joe Sixpack Index (blue line, left axis) shown against GDP (red line, right axis)

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The Middle Man Index

The middle class household with financial assets and real estate assets is Middle Man. Federal Reserve Publication shows the percentage of households owning various financial assets. Other than real estate, Middle Man holds transaction accounts (checking - 1% of all financial assets) and retirement accounts (roughly estimated by Econintersect at 25% of household financial assets).

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Unfortunately, retirement accounts are not separately detailed in the Z.1 reporting - but the graph below uses 25% of the change in Total Household Assets as a proxy for change in retirement accounts.

Total Household Assets (blue bars) vs Savings (red bars)

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Adding the financial assets of Middle Man to the housing and compensation data used in the Joe Sixpack index, we see that Middle Man is better off than last quarter with his situation - but the rate of improvement declined. It is the growth in value of real estate and other assets that is the governing factor for Middle Man (not wages).

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Comments

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Moon Kil Woong 4 years ago Contributor's comment

Good article. I would tend to agree, however, getting to this is tough given the skew from the non Joe's. The sad fact is there are more non Joe's today on the low end than before and there are less Joe's on the high end although they are much wealthier which is probably a more important change than the lack of change from the average Joes.

Steven Hansen 4 years ago Author's comment

Absolutely - the lower end is just surviving from hand-to-mouth and this group is growing