good "talk" about : GDP vs. GDI -- From : WSJ .....................................................
Sept. 7, 2023
Why Higher Unemployment Is Good News Now
A looser labor market is necessary for inflation to go down and stay down
By Greg Ip
<<<<< Since April, the share of consumers saying jobs are hard to get has ticked up notably while the share saying jobs are plentiful has ticked down, according to the Conference Board.
The labor market’s picture of increased slack, however, is contradicted by economic output. Gross domestic product grew a robust 2.1% annualized in the second quarter, and surging consumer spending has put it on track to top 3% in the third. These rates are well above the economy’s estimated 1.8% long-term potential growth rate and suggest intensifying inflation pressure.
But unlike unemployment, GDP shouldn’t be taken at face value. Indeed, it can be measured two ways. Adding up spending by government, consumers, business and foreigners on goods and services produces the familiar measure of GDP. Adding up the wages, benefits, profits, interest and rents earned from producing these goods and services yields the lesser-known gross domestic income. Adjusted for inflation, GDP has risen 2.5% in the 12 months through June, while GDI has fallen 0.5%, an unusually wide discrepancy.
Some of that gap might be due to falling Fed profits. Still, Nancy Lazar, chief global economist at Piper Sandler, said GDI lines up with many companies that are reporting stagnant sales volumes. Campbell Soup, she wrote in a report, jacked up prices, but sales volumes are declining, and its stock is down sharply this year. When corporate sales volumes decline economywide, “employment also declines, with a lag,” she wrote.
One way of handling the discrepancy is to split the difference. The average of GDP and GDI is up 1% in the past year, consistent with more slack in the economy but not a recession. Moreover, recent downward revisions to payroll employment and incomes suggest growth might be overstated. >>>>>
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