I track an estimation of consumption by capital income through the NIPA numbers and labor’s income share. Changes in this estimation give insights into how well capital income is doing. What do I find? The percentage of capital’s income used for consumption surged in the 2nd quarter 2015. To me, this is crazy. The dynamics […]
Effective Demand is basically a demand limit upon the business cycle. Wouldn’t it be great if it could be determined? Then we would know where the limit of a business cycles is. Well maybe we can determine effective demand. A simple equation for the Effective Demand Limit relates labor share to the utilization of labor […]
This is an excellent interview of former Fed analyst Danielle Dimartino Booth ( Dallas Fed) by Erin Ade at Boom Bust. I fully agree with her analyst analysis. Listen closely to her analysis of the housing market. She points to one area where low interest rate policy backfired.
Today Paul Krugman wrote… Link “Many economists used to think of the labor market as being pretty much like the market for anything else, with the prices of different kinds of labor — that is, wage rates — fully determined by supply and demand. So if wages for many workers have stagnated or declined, it […]
The Wall Street Journal just published news that Greece defaulted on its IMF loan. Link I have connections to some people in the banking industry who have said for years that Greece’s default was inevitable. Now the default looks like it is here.
The Effective Demand limit upon the economy is not a very visible concept in the econo-blogosphere. Yet, it represents a limit upon the utilization of labor and capital toward the end of a business cycle. When real GDP reaches its effective demand limit, normally we would see capacity utilization peak and start to fall. Capacity […]
The graph implies that as labor share falls, labor is less inclined to supply its labor… and the natural rate of unemployment rises. (link to Fred graph) Since 1947, the unemployment rate falls to a level consistent with implied supply & demand limits set by labor share. The US now seems to be reaching the […]
The unemployment rate is officially at 5.5% in the US. But is that rate true? Maybe the rate should actually be higher when one considers the low labor participation rate and the long-term unemployed. Civilian Labor Force The civilian labor force has not risen much since the crisis. (link) Do we conclude therefore that there […]
I will present a way to determine potential real GDP using a regression of past data. First take the official CBO potential and subtract it from real GDP. When the red line is above zero (0), real GDP is over potential. Normally the red line rises above potential before a recession. So it looks as […]