GDP vs. Nonfarm Business Output

Last week, I noted that real GDP on a y/y basis has been growing around 2.0%-2.5% since Q1-2010. That’s subpar. It was up 2.5% y/y during Q3. On the other hand, real output of nonfarm business was up 3.5% during Q3, and has been hovering around 3.0%-3.5% over the same period. Nearly all of the difference can be accounted for by the weakness in government spending.

That’s not a bad development from my perspective. The so-called “New Normal” is actually a combination of abnormally weak government spending on goods and services and relatively normal activity in the private sector. Remove the government (please!), and the economy looks like the Old Normal!

The growth in nonfarm business output since mid-2010 has been driven by relatively stable growth of about 2% in total hours worked in the nonfarm business sector and solid gains in productivity. That’s all good from my perspective.

Today's Morning Briefing: Jettisoning the Jitters. (1) Tuning out the bad news. (2) Plenty of good news. (3) Lots of opportunities to make money around the world. (4) A happy scenario for US economy next year. (5) Rising home prices could be very stimulative. (6) Great news: Business output outpacing GDP as government growth weakens. (7) So the New Normal is the Old Normal excluding the government! (8) Record high profits and cash flow. (9) Factory orders rebounding thanks to record profits. (10) No cliff jitters in latest NM-PMI. (More for subscribers.)