« Starting the blog again... First, Update original Effective Demand | Main | Is Effective Demand showing the limit of the Business Cycle... again? »



Feed You can follow this conversation by subscribing to the comment feed for this post.


After Qtr2 2014, Effective Demand initially jumped up and out. But the Qtr2 2015 jumped out but down very slightly.

How do you explain ED jumping out? Is this reducing production and selling off inventory? Something we discussed here:

Hey Jim,
I go back and take a look at this post...

Back in the 70s, when GDP hit the ED limit, the economy would start to rise along the AS curve leading to a rise in inflation. The dynamics are different now.
After 2Q15, inflation was weak with oil prices dropping. Labor share started to rise a bit. And capacity utilization fell quite a bit. So the ED curves rose and expanded outward allowing inflation to stay low as production increased. If the ED had not expanded to the right, GDP would have risen up the AS curve with inflation as it did in the 70s.

So production is not reducing. We see GDP rising in 2Q. But there is an effort to control inventories as capacity utilization drops. But at the same time, what is happening with China now? How much inventory are they dumping on the US market?

The comments to this entry are closed.

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 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 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:

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
Blog powered by Typepad
Member since 03/2013