That of course opens up all kinds of possibilities for data exploration, such as the chart we made in this post that compared vehicle miles traveled and the number of people who work at auto dealerships.
Of course, that comparison is kind of easy, but here’s a more intriguing one.
This chart compares the year-over-year change in population-adjusted vehicle miles traveled (the red line) vs. the yield on the 10-year Treasury bond (minus 5 to get the lines into sync).
It’s not 100% perfect (nothing is) but the peaks and troughs line up shockingly nicely, and make turns at just the right time.
That’s really not that weird.
The declining 10-year is a reflection of declining GDP growth and inflation over the last few decades. And the year-over-year change in vehicle miles traveled is also going to be economically sensitive. Thus: You’d totally expect troughs in yields to align with troughs in vehicle miles traveled.
But there’s more to it than that!
Look what happens when we add a third number to the mix.
The green line here is the year over year change in nominal GDP.
Note that until the crisis, all three lines basically aligned very nicely. Vehicle miles growth, the 10-year yield, and nominal GDP growth all moved up and down at roughly the same pace. Again, totally logical.
But something has changed since the crisis!
GDP growth remains (relatively) elevated, while the growth in vehicle miles traveled and the yield on the 10-year both hit (virtually) record lows.
The post-recession era has seen a novel thing happen in American history: a period of recovery coupled with a major exodus workers from the labour force.
The demographic shift explains both lines: It explains the collapse in vehicle miles traveled, and it explains the huge shift into risk-free Treasuries (which would depress yields on bonds).
So if you’re a bond trader, put a little less focus on growth, and start watching vehicle miles traveled. If America keeps driving less, it’s probably a sign that yields will keep grinding lower.
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