In the period following recessions, the black line tends to be above the red line, which means GDP growth accelerates (drops on chart) relatively faster than jobless claims fall. This was true following the recessions beginning in 1990, 2001 and 2007.
Leading into theses recessions there was a period where the red line on average was noticeably above the black line, as the growth rate faltered before jobless claims started to increase, even allowing for the 5-month lead time.
A similar gap with the red line above the black line started a little over a year ago. In the prior two recessions, the gap started about two years before the recession. If the same pattern follows in this business cycle, the beginning of the recession would be less than a year away.
Looking back on 2013, many of the economic and political themes seemed familiar: a weak economy. Growing income inequality. Gridlock in Washington. Partisan wrangling over fiscal policy. But others, like the disastrous rollout of the Affordable Care Act HealthCare.gov website and the government shutdown, were new or at least revivals. Below are 10 charts to illustrate a depressing first year of President Obama’s second term:
Click here to read the article
I have covered a lot of data and a lot of terms, many of them foreign to average investors. The charts in and of themselves don't seem so alarming. So what is the problem?
The velocity of money is a term of art. It is nothing more than GDP divided by the money supply. It is a proxy for how fast money turns over in the economy. You get your pay check and buy groceries, the grocer pays rent on the store, the landlord pays interest to the bank, the bank lends money to a borrower wanting to buy a new car.
The longer QE goes on, the more difficult it will be to find the right balance. I listened to Janet Yellen's testimony at her confirmation hearing. It did not inspire confidence. Her comments were consistent with an academic review through the "rear view" mirror rather than a look ahead in an economy where giddy investors are already paying billions and billions for unprofitable companies whose future profitability is by no means assured; where multiple offers are being made on real properties in some housing markets; and, where analyst upon analyst is calling for the Dow Jones and Standard & Poor indices to carry on to ever higher levels at expanded earnings multiples calling the current market "inexpensive".