“Healthy” is a relative concept

The following is typical of comments on the GDP release:

The U.S. economy expanded at a healthy pace during the third quarter, a sign of sustained growth fueled by government spending and a narrower trade deficit despite mounting concerns about the health of overseas economies.

First, when you follow annual rates the feeling is you´re on a roll coaster. Lots of “ups and downs”. That´s always been true, even during the “Great Moderation”.

Over the last four years, after recovering from a “stroke”, measured on a year over year basis the economy´s “EKG” shows signs of high stability. But if you take the economy´s “pressure” it will come up “low”.

The charts illustrate.

Relative Health

And in this kind of situation some “signs” – like unemployment – give out misleading information, confusing the “medical board”.

Some say the economy will never be able to run at “previous speeds” and at higher levels, having been “secularly stagnated”!

One thought on ““Healthy” is a relative concept

  1. Crazy on crazy. It is crazy to use the crazy pattern of RGDP QoQ annualised as a guide to economic health when the dataset is as unreliable at first estimate as RGDP. You are absolutely right to use YoY, mature and sensible and long term.

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