Gross domestic income growth virtually nil in 1st quarter

The stock market danced today to the beat of China, which promised to stay true to its European investments. Whatever our biggest lender says goes.

Woo-hoo! It’s back to Dow 10,000.

So.

Back in nerd-land Calculated Risk, who marches to his own drummer, pulled out some sour notes from the Commerce Department report on gross domestic product, which was trimmed for the first quarter to 3.0% from 3.2%. But that wasn’t CR’s concern. No, he was worried about gross domestic income, a sister number buried in Table 9 of the report from Commerce’s Bureau of Economic Analysis. Broadly put, GDP measures the values of all goods and services produced here while GDI measures personal income from goods and services.

CR reports that recent research shows that GDI is a more precise gauge of the economy; the people who officially anoint the beginning and endings of recession use both GDP and GDI in their determinations. And GDI isn’t nearly as robust as what can only be called a tepid GDP number. From CR:

It appears that GDP bottomed in Q2 2009 and GDI in Q3 2009. Real GDP is only 1.2% below the pre-recession peak – but real GDI is still 2.3% below the previous peak.

The  GDI number hides another critical weakness: without transfer payments from Uncle Sam, personal income growth would be zero.

In the chart below, GDI is red, GDP  blue; 100% at the top scale, left, is a peak in a cycle. Click to enlarge.

Gross domestic income points to a weaker, slower recovery

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