From Goldman, this chart takes a look at GDP growth vs. employment growth vs. Goldman’s own Current Activity Indicator (CAI).
Photo: Goldman Sachs
As you can see, while each line is broadly consistent (especially over the last 7 years), lately they’ve been moving in different directions.
Employment has raced ahead of the others, then pulled back a bit. The Current Activity Indicator is zooming higher now, while the GDP data has stalled out around 2%.
This is why people are scratching their heads so much, talking about the GDP-less recovery and whatnot. And it’s why you simultaneously hear discussions about how the economy is gathering momentum, and how the data is rolling over.
It makes for a strange and murky time in the world of data.
Goldman’s Andrew Tilton proposes a few ideas for why the signals are mixed:
- The different measures measure different things. It makes sense for labour growth to outpace GDP growth at this stage in the cycle, as productivity grads.
- The difference in the data is about timeliness, with the GDP numbers being based on older data.
- It could be a matter of noise and the sampling pools.
- It could be a matter of the warm weather skewing some series differently than others.
- It’s possible everything will be revised so that all the numbers look more similar.