Economics Lesson of the Day: Waste vs. GDP

Freight train carrying waste

Want a strong indication of where the economy is heading? Look no further than the amount of generated waste. By taking a look at the number of rail shipments of garbage and scrap, you can get a pretty accurate depiction of whether or not the gross domestic product (GDP) – an overall measure of the economy -- is strengthening or weakening.

It makes sense if you think about it – more waste means consumers purchased more “things”. A strong economy is one where consumers are spending and businesses are making money. According to Bloomberg, there’s an 82.4 percent correlation between the waste and the economy. Essentially, this means that the year-over-year line graphs of both waste and the economy look very similar.

At more than 82 percent, it’s a stronger economic correlation compared to that of metals, lumber, petroleum and auto sales.

You may think the railroad industry is on its way down, but that’s not at all true. According to the Association of American Railroads (AAR) website, the freight rail industry plans to hire 15,000 new employees this year alone. Waste and scrap make up only about 2.3 percent of total freight carried by trains in the U.S., according to the AAR. This equates to 42,778 tons of garbage (2011).

Trains carry waste to landfills around the country. Places with limited space for landfills, such as New York City, must transport waste to other areas for proper disposal. A recent report at the Business Insider stated the number of waste shipments is way down – a bad sign for the U.S. economy (see graph below). So, if the waste vs. economy indicator holds true as it has in the past, expect the economy to take a downturn in the not-so-distant future. Sorry for the bad news! :(

waste freight loads graph