{"id":447928,"date":"2010-03-19T09:41:59","date_gmt":"2010-03-19T13:41:59","guid":{"rendered":"http:\/\/blogs.wsj.com\/economics\/2010\/03\/19\/does-gdp-understate-depth-of-the-recession\/"},"modified":"2010-03-19T09:41:59","modified_gmt":"2010-03-19T13:41:59","slug":"does-gdp-understate-depth-of-the-recession","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/447928","title":{"rendered":"Does GDP Understate Depth of the Recession?"},"content":{"rendered":"

Gross domestic product figures show that in the recent downturn the economy experienced its sharpest contraction since at least the 1940s. But a Federal Reserve<\/strong> economist argues that the recession was even more severe than GDP suggests.<\/p>\n

\"\"In a paper<\/a> being presented Friday at the Brookings Panel on Economic Activity<\/strong><\/a>, Fed economist Jeremy Nalewaik<\/strong> examined the differences in GDP and a closely-related measure, gross domestic income. GDP measures the output of the economy as the sum of expenditures — consumption, plus investment plus government spending plus net exports. GDI measures total income in the economy.<\/p>\n

In theory, the two measures should equal one another, in practice they don\u0092t quite, and Mr. Nalewaik argues that GDI is the better of the two.<\/p>\n

He finds that when the Commerce Department<\/strong>\u0092s Bureau of Economic Analysis<\/strong> revises its national income and product accounts, GDP figures move more closely inline with GDI. GDI also appears to have a stronger correlation with other economic indicators, and its recent movement around turning points suggests it more closely tracks the economy.<\/p>\n

He notes that GDI fell far more sharply in the teeth of the recession, dropping at a 7.3% annual rate in the fourth quarter of 2008, and 7.7% in the first quarter of 2009. GDP, in comparison, fell by 5.4% and 6.4%. Moreover, while GDP showed the economy began to grow in last year\u0092s third quarter, GDI showed it continued to contract. (Fourth-quarter GDI figures aren’t yet available.)<\/p>\n

\u0093[T]he latest downturn was likely substantially worse than the current GDP\u0085 estimates show,\u0094 he writes. \u0093Output likely decelerated sooner, fell at a faster pace at the height of the downturn, and recovered less quickly than is reflected in GDP\u0085 and in conventional wisdom.\u0094<\/p>\n

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Gross domestic product figures show that in the recent downturn the economy experienced its sharpest contraction since at least the 1940s. But a Federal Reserve economist argues that the recession was even more severe than GDP suggests. In a paper being presented Friday at the Brookings Panel on Economic Activity, Fed economist Jeremy Nalewaik examined […]<\/p>\n","protected":false},"author":850,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-447928","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/447928","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/850"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=447928"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/447928\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=447928"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=447928"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=447928"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}