Feb 15, 2019

Trash is a good sign for the economy

In this image, a plain flies overhead of a trash can.

Photo: Brendan Smialowski/AFP/Getty Images

It's generated fewer headlines in recent years, but not that long ago the trash index was all the rage. The idea, popularized by economist Michael McDonough, posits that U.S. GDP growth is tightly correlated to the change in collection of trash.

The bottom line: More trash is good. It means people are throwing out old things to make way for new ones and that developers are building new things and disposing of the old, as McDonough explained to Marketplace in 2012.

According to Bloomberg, the index was incredibly accurate between 2001 and 2010, there was an 82.4% correlation between flow of trash and the economy.

What we're hearing: Jim Fish, CEO of Waste Management, says that right now the trash is saying good things.

"I mean, we all know there's a recession coming at some point, we just don’t know when. And 2009 was a bit different than the normal recession because it was so driven by housing.
"And so, our business really on the housing side has not returned to where it was in 2009.
"But, when we look at the indicators that might lead us to believe that a recession is on the horizon, the best indicators for us are our volume numbers .... We tend to be more of a lagging indicator than a leading indicator. But, those tend to be somewhat leading. And all of those look strong right now and that carries over into January when we looked at our volume numbers ... the good news is right now we're not seeing that softening that's been talked about over the last few months."
— Jim Fish, CEO of Waste Management, on the company's earnings call Thursday

Waste Management on Thursday reported fourth-quarter profit of $531 million, with net income of $1.24 per share and revenue of $3.84 billion, topping Wall Street expectations.

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