Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24
Micro Strategy Bubble Mania - 10th May 24
Biden's Bureau of Labor Statistics is Cooking Jobs Reports - 10th May 24
Bitcoin Price Swings Analysis - 9th May 24
Could Chinese Gold Be the Straw That Breaks the Dollar's Back? - 9th May 24
The Federal Reserve Is Broke! - 9th May 24
The Elliott Wave Crash Course - 9th May 24
Psychologically Prepared for Bitcoin Bull Market Bubble MANIA Rug Pull Corrections 2024 - 8th May 24
Why You Should Pay Attention to This Time-Tested Stock Market Indicator Now - 8th May 24
Copper: The India Factor - 8th May 24
Gold 2008 and 2022 All Over Again? Stocks, USDX - 8th May 24
Holocaust Survivor States Israel is Like Nazi Germany, The Fourth Reich - 8th May 24
Fourth Reich Invades Rafah Concentration Camp To Kill Palestinian Children - 8th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Is the U.S. Headed for a Recession?

Economics / Recession 2015 Apr 01, 2015 - 06:27 PM GMT

By: DailyWealth

Economics

Dr. David Eifrig writes: Are the government's economic statistics to be trusted at all?

Every economic statistic – from gross domestic product (GDP) to employment to inflation – comes from some agency performing calculations in a complex environment. But what do these numbers actually show us? Are these figures finagled by the government or other interested parties?


The answers are tricky...

You can't fully trust economic statistics because they describe quantities of things that can't be entirely known. Measuring the economy is difficult. Very difficult. And in a sense, there are no "real" numbers. But the official measures of inflation, GDP, or employment aren't hiding anything based on someone's conspiracy agenda.

This week, I'm going to cover each of these ideas – GDP, inflation, and employment... and see if the "official" stats are telling us the full story. We'll start with a close look at the official GDP figures...

People like to throw around GDP figures as a measure of a national economy's strength and the individual's standard of living. Most people don't monitor it closely, but they simply note when a headline or TV reporter broadcasts the quarterly update. This is often called the "headline number."

But GDP is complex. It's hard to compute. On January 30, the Bureau of Economic Analysis (BEA) reported the economy grew at a rate of 2.6% from September 30 to December 31. The agency also revised its number for the previous quarter. That's because the BEA gets this number out so fast, it doesn't have all the information yet. So it's constantly revising past numbers to get them closer to reality.

This time, the BEA reported that the third quarter of 2014 didn't grow at the blistering 3.59% pace it initially reported. It actually grew faster at 5%.

That's not unusual. Throughout this recovery, most BEA updates have revised numbers up from initial estimates. Take a look:

This means the economy is doing even better than most "headline" observers realize.

(And it suggests the numbers are honest. Why would you hide the good news in the old numbers no one pays attention to?)

We're following GDP closely. Besides being the biggest catch-all number for the health of the economy, we're watching for extended accelerated growth.

The reason is what's called "potential GDP." In the most basic interpretation, we have a lot of capital, factories, and businesses... and 318 million people in this country. There is a particular amount of economic output that these people will produce.

But in a recession, people don't buy as much, so people don't make as much money. The economy doesn't live up to its potential.

It has, however, been shown that after recessions, economies tend to eventually catch up to this potential GDP. It has also been shown that when you pair a recession up with a financial crisis, it takes even longer for GDP to catch up to the potential level... on average about nine years.

The thing is, we're still waiting to fully catch up...

There's no guarantee when, or if, we'll get back to potential GDP. But plenty of resources are creating pressure that should push growth upward, not downward.

It's clear the economy is doing well. But it's not as overheated as many bears would have you believe. The data show the economy is growing steadily... and we still have plenty of upside potential. Therefore, we don't expect a recession any time soon.

In tomorrow's essay, I'll cover inflation. Specifically, I'll take a look at the official consumer price index (CPI) figures, and see if they're telling us the whole story about rising costs.

Here's to our health, wealth, and a great retirement,

Dr. David Eifrig

P.S. With the economy slowly recovering, now is a great time to take advantage of one of my favorite ways to earn tax-free income. I call it the "Master's Exemption"... and if you own a home or a condo, you qualify for this 100% LEGAL loophole. A friend of mine makes enough tax-free income from this for several nice vacations a year. You can learn about this loophole and many others in my new Big Book of Retirement Secrets. Learn how to order a FREE copy right here.

http://www.dailywealth.com

The DailyWealth Investment Philosophy: In a nutshell, my investment philosophy is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. Our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. I believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.

Customer Service: 1-888-261-2693 – Copyright 2013 Stansberry & Associates Investment Research. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This e-letter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Stansberry & Associates Investment Research, LLC. 1217 Saint Paul Street, Baltimore MD 21202

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Daily Wealth Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in