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06/22/2014

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Every time I see this set of graphs, I find myself studying them as though they were new to me.

Literally amazing. I feel that I am watching a slow motion train wreak.

Perhaps you should try to get something published in a peer reviewed journal?

Hi Jim,
It's not time yet to publish. I have to let the data play out to the end. People would not believe it yet.

There was an interesting chart of the 25 worst drops in GDP. All but one of them was during a recognized recession.

The one not in recession was for the first quarter of 2014.

Source:
http://www.zerohedge.com/news/2014-06-25/unforgettable-winter-bank-americas-explanation-17th-worst-gdp-print-us-history

I can't match their exact numbers for GDP change in percent but I can get close. Looks like they are using some series released after 2008 but before the current release. Or seasonally vs not seasonally adjusted would be another reason for the difference.

So have we already seen the rise in GDP???

What do you think?

HI Jim,
I have been looking at a graph that I have using GDI. Here is the link.

http://research.stlouisfed.org/fred2/graph/?g=EiG

GDI responds more directly to effective demand than real GDP. At the end of the last business cycle, when GDI hit the effective demand limit, it began to flat-line horizontally for two years.
I am thinking that GDI is still about $100 to $200 billion away from that limit.
My sense though is that real GDI bounced somewhat against the effective demand limit in the 1st quarter. The effect was aggravated by the weather.
So I am wondering now just how much of a bounce back we will see in GDP or GDI.
There will be some, and it may seem quick, but then real GDP may slow down real fast after the bounce back.

Have you plotted GDI vs Effective Demand limit similar to what you did above with GDP?

Do you see the same dancing around just before a recession?

So GDP is spending and GDI is income which affects spending, right?

In the end economists will pay more attention if the Effective Demand Limit actually limits GDP. Or so it seems to me anyway.

We are living thru extraordinary times.

The link to the graph with GDI is here...
http://research.stlouisfed.org/fred2/graph/?g=EiG

GDI looks to react more strongly to the effective demand limit.

Yes, I saw that GDI graph and the recent downturn in GDI

But I was asking if you had plotted GDI vs TFUR leading up to earlier recessions?

And if so, did you see GDI dancing around just before a recession?

I have not put GDI against the effective demand limit yet. I should do that because the shape of their interaction will be different.

One thing about the GDI is that it comes out one month after GDP. But with initial releases of GDP being so far off, that really shouldn't make a difference.

"I should do that because the shape of their interaction will be different."

That is what I was thinking. And the difference itself might be informative.

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Data as of 3rdQ-2017
Effective Demand = $17.424 trillion
Real GDP = $17.157 trillion
Productive Capacity is rising to next business cycle = $23.558 trillion
UT index is falling= +1.1%
Effective demand limit = 73.9%
TFUR = 72.8%
ED Fed rate rule (down from a peak of 3.8% in 2014) = 2.2%
Estimated Natural Real Interest rate = 2.2%
Short-term real interest rate (fallen from 2.8% peak in 2014) = -1.7%

There is no recession for 3rdQ-2017. Chance of recession is growing as economy heads toward 2nd effective demand limit in this business cycle. I am forecasting economic contraction in 2018.




Click on Graphs below to see updated data at FRED.

UT Index (measure of slack):

The UT Index

z-vertical:

z-vertical

z derivatives in terms of labor & capital:

z derivatives in terms of labor & capital

Effective Demand, real GDP & Potential GDP:

ED, real GDP & pot rGDP

ED Output Gap:

ED Output gap

Corporate profit rate over real cost of money:

Corp profit rate over real cost of money

Exponential decay of Inflation:

Corporate profits impact Inflation

Measures of Inflation:

Measures of Inflation

YoY Employment change:

YoY employment change

Speed of consuming slack: yoy monthly:

Speed of consuming slack

Speed of consuming slack: quarterly:

Speed of consuming slack quarterly

Real consumption per Employee:

real consumption per employee 2

Will real wages ever rise faster than productivity?:

Productivity & Real Wages

Real Wage Index:

real wage index

Productivity:

Productivity

Productivity against Effective Demand limit:

Prod & ED limit

Bottom of Initial Claims?:

Initial claims

Tracking inflation expectations:

Fisher effect?

M2 velocity still falling:

Measures of Inflation

All in one:

All in one

Double checking labor share with unit labor costs & inflation:

ULC LS CPI
My Photo
Edward Lambert: Independent Researcher on Effective Demand.
Some links for economic analysis
Fed Views - San Francisco Fed, around 10th of each month.
Well's Fargo monthly - around 10th of each month
Well's Fargo weekly
Well's Fargo Interest rate report
Well's Fargo Economic indicators
T. Rowe Price weekly market wrap-up
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