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05/15/2015

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Hi Edward,

So does this development adjust your thinking on pending recession? Or do you still think more likely that effective demand will rise again before beginning to contract heading into 2016?

I keep in mind that equity market risk tends rise dramatically 4-6 months before a recession actually starts. That said, this one could be a bit different on that front. With rates so low, buybacks continuing, we may need to see the whites of the eyes before market acknowledges!

Thank you, Edward, getting caught up on last few posts now!

Best,

Alan

Hi Alan,
I still see the possibility of recession opening up more toward the end of 2015 going into 2016.
I do not think effective demand will rise again going forward into 2015. Headline inflation stopped its fall with oil prices rising.
The economic situation is developing some instability.

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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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