Miles to Go Before We Sleep

August 17th, 2011 at 11:06 pm

Every few months I check in on this graph by the Federal Highway Administration of vehicle miles driven since the mid-1980s (it’s a 12 month moving average).  And every time I remember to click over there, I’m struck by the how unique the recent trend is in historical context.

Yes, this was a worse recession than other downturn in the time series, and gas prices spiked up to about $4/gallon last spring.  But they’ve since come down and are around $3.60 now, on average, although the graph probably isn’t picking up much of the impact of that decline—it’s a moving average and the last observation is May.

Still, other evidence I’ve seen has led me to question a pretty standard view in economics that demand for gasoline is highly inelastic in the short run.  That is, folks don’t necessarily cut down all that much on their driving in times of high prices or recessions.  You can sort of see this in other recessionary periods in the graph—little pauses in the steadily upward trend in 1991 and around 2000.  But they’re little blips.

What you see in the current period is a quite different—a massive decline in driving over the downturn with little uptick since.  Again, both high unemployment and high prices are in play here, so there may be a bounce back out there once the economy gets back on track.  But it bears watching—there may be a new behavioral response in play, with people’s driving habits a lot more responsive to these economic changes than they used to be.

Ok, but what’s the big deal?  Well, I’ve generally been skeptical of arguments about “the new normal,” thinking that much of what we’re going through is cyclical, not structural, meaning things pretty much revert back to the old normal once we’re growing in earnest again.  But it’s worth tracking signals like this that remind one that at some point, if it goes on long enough, cyclical morphs into structural.

Source: Federal Highway Admin, see link above

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16 comments in reply to "Miles to Go Before We Sleep"

  1. Jim Edwards says:

    I think it’s a combined trend of the type of work we now do and the return of the city. Many people can now subway commute who could not previously. Computer jobs can be near nice neighborhoods while heavy manufacturing rarely can. The start was during the housing bubble, and my experience at the time is houses in or near the city were jumping while the rural homes were not. This might have been a Seattle phenomenon.

  2. Sandwichman says:

    Let’s hope this is one trend that endures.

  3. Misaki says:

    linked from some random site:

    it was pointed out on Crooked Timber a few weeks ago that world oil consumption per capita already peaked… and of course, one of the arguments of the book Unrestricted Warfare was that after the unique political and military conditions of the first Gulf War, such a war would not be seen again. Instead, there would be conflicts over resources both at the level of direct military involvement and at other dimensions in the world, similar to the colonial conflicts prior to the social and political developments of the 20th century or so.

    The invasion of Iraq will very probably be portrayed in history as a war over oil, despite the widespread confusion of the general public at the time about the justification for that war.

  4. RMGHicks says:

    I think that we should not underestimate the role of the daily commute in gasoline consumption. With fewer people working and many fewer working full time, that trip – which comprises the bulk of most people’s driving during the work week is cut down or cut out. So that might be part of the “new normal.”

  5. Nylund says:

    So what is the story?

    Is it: high unemployment rate -> less commuters -> less driving?

    Are budgets already stretched so thin whereas in the past, people would have cut other things before cutting driving, but now there’s little else to cut?

    Has there been a change in the access, price, or quality of travel alternatives?

    That’s a pretty obvious structural break in a time-series if there ever was one!

    • MSHuiner says:

      In my personal situation, the answer to your question is YES. Since losing my job in March, I am driving much less, and driving more carefully when I do. I plan what used to be several days worth of errands into one prudently orchestrated trip. My transmission is dying, so I am cutting out even more, but there is no money to get that fixed.

      Nationwide if this level of unemployment is “the new normal,” then this may be the case for fewer miles driven to become a new structural reality.

  6. Geoff Freedman says:

    The great recession was was a financial downturn, like the great depression. My observation is catastophic events like these two cause a profound change in underlying values and beliefs in a society.

    I suspect we will turn into a more frugal society over time, with consumptive behavioral changes affecting aggregate consumption along with some other factors mentioned in the other comments.

    I think the longer this downturn impacts the economy, the more likely this psychological shift will have long term consequences.

    Tangentially, Japan’s lost two decades seem to have at its root cause high levels of indebtedness which were allowed to deleverage very slowly. It was a balance sheet recession, much like our own is. The causations may have been disimilar, but both resulted in over indebtedness. Paul Krugman has discussed the liquidity trap in Japan in detail. It appears we are headed down a similar path, without actually dealing with all the bad debt still on the books over our banks and finacial institutions. Instead we are papering all this junk over with very loose monetray policy rather than developing policies to deal directly with the bad debt.

    I am not all that familiar with the details of what happened in Japan, but I suspect there is something we could learn from those events.

    One of the results of Japan’s long unwind from this event is that conspicuous consumption has never returned to close to the 1980’s levels in that country.

  7. emptywheel says:

    It’d be really helpful to map total employment against miles driven, because the curve is pretty close. (The Feb 2010 percent of Jan 2008 total employed is, by my math, 92.3% and total miles driven for same months is 93.9%, so not exact, but close).

    And yes, to those up-thread who are surprised that unemployment might have this much of an effect, in SE MI a few years back we regularly joked about how we had totally lost the concept of “rush hour” because there were so many fewer people on the roads. That’s where most people rack up miles, and if you’re not working, you’re probably only driving to interviews (if you have them) and much more localized shops).

  8. Michael says:

    Yeah, um. About that “growing in earnest again” thing.

    So, there is this thing called the social contract which underlies economic activity…

    • EdH says:

      dang, I was going to get him on the ‘once the economy gets back on track’ thing. Jared, have you been reading your own blog?

      • Jared Bernstein says:

        On occassion I take a look at it. It’s a little dry for my taste.

        Jeez, I mean someday, somewhere out there, we get back on track…the question is, which track: the track back to where we’ve already been or the one to a better place!

  9. Southern Beale says:

    People don’t have jobs to drive to.

    But also, I’ve noticed a major shift to more energy efficient cars on the road in the past 5 years. Used to be where I live is SUV central. You’d see Hummers on the road just as a mater of course. Now I see Priuses everywhere, compacts, etc. Cash for clunkers maybe had something to do with it, but I saw the trend well before then. We’ve had some big gas shortages here in Nashville, in Sept. 2008 a hurricane knocked out a supply pipelines and gas stations here and in Atlanta and around Florida had to put brown bags over the pump handles. That and some big price spikes got people thinking a little more fuel efficiency isn’t such a bad thing.

  10. Anthony Townsend says:

    Here’s a possibly simple explanation – it’s not a shift in commuter behavior, or teens driving less. It’s less commercial traffic. Because of the recession. Not just less economic activity, but businesses are probably much more effective at cutting back on extraneous VMTs than commuters.

  11. PPMcC says:

    Ive been watching this curve for a long while too. What strikes me is that if this flat curve is structural, then real estate is in for some very big changes. My hunch is that this reflects a large change in attitude about cars and commutes. Optimizing for short commutes, not bucolic homes seems the new thing.

    If this trend continues, the home building industry will have to change their business model and new home construction will be a lagging indicator of recovery. We should also be wary of putting money in the distal exurbs; they are unlikely to recover value.

  12. Robert Thille says:

    Other factors, like people becoming aware of their CO2 emissions, obesity, the desire to ‘eat/shop local’ may all feed into the reduction in miles driven.

  13. Tree Bark says:

    Take a look at what happened to Borders. The internet is reducing our need to leave the house to shop. I’m sure that’s not the only factor, but it can’t be overlooked.

    Also, as people gradually take fitness and global warming more seriously, I’ve personally seen a spike in the number of people biking and — god forbid — actually walking to destinations like work and shopping.