So much for the Okun’s Law mystery?
Those who think Gross Domestic Income, whose first quarterly estimate arrived in the same release the third estimate of GDP, is the more useful growth measure of the two will be encouraged by this:
Real gross domestic income (GDI), which measures the output of the economy as the costs incurred and the incomes earned in the production of GDP, increased 4.4 percent in the fourth quarter, compared to an increase of 2.6 percent in the third.
We’ll be discussing in more detail during Markets Live, but neither real GDP growth of 3 per cent nor the Personal Consumption Expenditure price index of 1.1 per cent changed from the second estimate.
So that’s quite a divergence between GDP and GDI. GDI growth in the third quarter was also revised from 0.2 up to 2.6 per cent.
This brings full-year 2011 GDI growth to 2.1 per cent, better than full-year GDP of 1.7 per cent.
And in the second half of the year, GDP grew at an annualised 2.4 per cent while GDI grew 3.5 per cent (H/T Wolfers). Makes the labour market improvement in recent months seem less weird.
Our explainer-type interview last year with the Fed’s Jeremy Nalewaik on GDI is here.