In this effective demand research, I calculate the output gap by comparing capacity utilization to the effective labor share.
You will see a graph to the right on this blog where that value is update. The graph is called, ED Output Gap.
In the past, the output gap reaches a peak between +$100B to +$200B before heading into a recession. The current calculation is doing the same. Yet the recent steep decline in the output gap would normally signal an economic contraction is near.
Are we that close to a contraction?