CHART OF THE DAY: A Secret Economic Indicator Shows The Economy Is Still On Fire

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Yesterday’s GDP report was a “miss” in that the 3.0% revised number for Q4 was well below the “whisper”, which was as high as 3.5%.

But don’t despair just yet.

Matthew O’Brien at The Atlantic has a good article about an alternative measure of our economy: Gross Domestic Income (GDI).

What the heck is GDI? It’s just an alternative measure of the size of the economy. The same way that the unemployment report uses two measures — one for the official rate and another for the estimated jobs added — economic growth relies on both gross domestic product and gross domestic income. Whereas GDP measures the sum of money spent in the economy, GDI measures the total income received in the economy. Since people get money from selling things, there shouldn’t be any difference between GDP and GDI. In practice, there are differences. But GDP and GDI generally don’t deviate too far from each other.

Anyway, lately the numbers have been diverging, as the chart that O’Brien put together shows.

One reason why this might be a big deal is that it can help explain the seeming divergence between GDP and the fall in the unemployment rate. By looking at the GDI, the gap isn’t quite so strange.

chart of the day, gdp vs gdi, march 2012

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