Back on May 30th, I did a blog post talking about the relationship between Real Gross Domestic Income (GDI) and Real Gross Domestic Product (GDP).  I explained it this way:

"Gross domestic income (GDI) is defined by the BEA as; "the incomes earned and the costs incurred in the production of gross domestic product (GDP)."  So the curious question brought up in the chart below is, how much longer can real GDP stay positive when real GDI has been negative for the last two quarters?  Government data is "interesting" these days, but my guess is not for much longer.  This would be the first time since WWII where real GDI contracted for two quarters and real GDP did not follow that same path..."

Well, make that 3 quarters in a row!  That's right, real GDI just came in and it has contracted for the third consecutive quarter.  Now, what makes this amazing is, this is at the same time real GDP is supposedly accelerating (see chart below)!  



What is even more amazing is that the growth disparity between the two metrics has just hit an all-time high.  The difference between the two has now reached 3.62 standard deviations, eclipsing the old record set in July 2007 of 3.11 standard deviations.  What's the big deal?  Well, these two measures are supposed to equal each other.  The average standard deviation, going back to 1949, is zero.  



This means that there is either a large negative revision to real GDP coming, or a large positive revision to real GDI coming.   Historically, it is GDP that gets the revisions.  Some people call this economic growth miracle "Bidenomics", I call it BS.

Payroll Friday's are always exciting for me!  I know, I need a life, but I digress.  When the numbers were released on August 4th, the administration cheered at the apparent success of "Bidenomics", me, well, I laughed and shook my head once again.

The headline numbers showed payroll growth of 187,000 new jobs and a DROP in the unemployment rate to 3.5%.  Remember, this is at the same time we supposedly just had nominal GDP growth of of 6.3% (real growth of 2.6%).  Once again, this doesn't jive with other sources of data to verify both payroll and economic growth.  Specifically, I am referring to federal tax receipts.  The chart below shows two things.  First, the relationship between payroll growth and tax receipts and second, it shows that we just had the largest drop in federal tax receipts in history! 



Now, how is this possible?  Well, about the only way this could happen is if we had a huge shift in the makeup of employment.  When digging into last month's data, we did see the addition of 256,000 people classified as "multiple job holders where both jobs are part-time".  At the same time, we saw a large drop in full-time job holders of 585,000 people.  We know part-time jobs pay less than full time.  We also know that management positions pay more than part-time positions.  So, it is possible to see job growth with a drop in tax receipts under this scenario.  However, the largest drop in federal tax receipts ever, while employment growth and GDP growth are still positive?  I still can't reconcile the labor or GDP data and as of right now, I am just giving up at this point.  Some call it "Bidenomics", I call it "BS".

At the 2023 ALMEdge conference, I posted the following chart created by an entity known as the Econ P.I..  I think it is the best visual summary of what is happening in the U.S. economy.  I just wanted to update everyone and show the marked deterioration in the data from January through July.  Even more important, notice that all the employment data is now either in the "Decline" quadrant, or the "Contraction" quadrant.  I find that interesting given the drop in the unemployment rate to 3.5% in last Friday's employment report.