Sunday, September 30, 2012

NGDP and Wages

Nominal GDP divided by the wage rate (multiplied by 2000 to get an annual wage,) is approximately 13 percent below the trend of the Great Moderation.   (Since the GDP deflator and hourly production and nonsupervisory wages are both between 2 and 3 percent below trend, it should be no surprise that this ratio is below trend almost exactly how much real GDP is below trend.)

If nominal wages had remained at $18 as they were when nominal GDP peaked in 2008, the ratio would have increased by 8 percent.   Which is, of course, exactly how much nominal GDP has risen over its previous peak.   The ratio of nominal GDP to wages would still be about 5 percent below its trend growth path.

1 comment:

  1. We got to be pretty careful with these things because if we make mistakes in these stuff then it could prove to be disaster. I have been doing Forex trading for past few years and I always follow updates about these things since it obviously matters quite a lot. I don’t worry all that much because with broker like OctaFX, I do have cover up and that’s through their cash back system where I get 50% back on all trading orders including the losing one’s too!