More on capital consumption
A week ago, we highlighted that the fraction of investment that capital consumption comprises is a great explainer of the unemployment rate. It's easy to see with this chart:
What's remarkable is how this relationship has held up over the years despite the fact that capital consumption has collapsed as quality of goods has dramatically improved, possibly beginning around the Japanese quality revolution (and the significant competition it caused) in the 80s:
So: US workers are getting burnt on both sides. One imagines that the US will be converging on limits on what's possible to maintain output. Further, it may indicate that the US is actually close to impairing its potential output. It will take some time to think about what that really may mean.
So: US workers are getting burnt on both sides. One imagines that the US will be converging on limits on what's possible to maintain output. Further, it may indicate that the US is actually close to impairing its potential output. It will take some time to think about what that really may mean.
