Watch them live March 6-9!

Now, back to the data.

Invisible Derivatives

Here’s a garden-variety mainstream media market narrative right now. I made this up, but similar thoughts are voiced everywhere.

U.S. growth is finally taking off after years of stimulus. We’re near full employment, and wages are starting to rise. Consumers are opening their wallets just as tax cuts and deregulation embolden business to expand. At the same time, we are hitting resource constraints that have the economy close to maximum output. The resulting concern about inflation is pushing interest rates higher and taking some froth out of the stock market.

There are a lot of people who agree with this narrative, especially those who talk to us via the mainstream media. The problem with that story is that they are assuming facts that aren’t necessarily proven, two in particular:

• We’re nearing full employment.

• The economy is close to maximum output, or “potential GDP.”

Are those statements correct? How do we know? How do we even define full employment and maximum output? Measuring them isn’t like sticking a thermometer in your holiday prime rib to see how it’s cooking (which, by the way, if you are serious cook, you absolutely must be doing).

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