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Eric Basmajian
Eric Basmajian
@EPBResearch
Diminishing Marginal Returns

The productivity of our debt is collapsing and that is creating a major problem.

The problem is here now, and not in the future.

Here is why:

1)


Charted below is the increase in total debt and the increase in nominal GDP in the 8 quarters before each of the last six recessions.

In other words, how much did debt increase, and how much did GDP increase in the final two years of each economic expansion?

2)


As the chart shows, it is taking a larger amount of debt to increase GDP.

3)


Graphed another way, leading up to the 1980 recession it took about 1.94 dollars of debt to boost GDP by 1 dollar.

Leading up to the COVID recession saw debt increase nearly 6 dollars for each 1 dollar of GDP growth.

4)


Flipping the ratio shows the decline in the utility of debt.

We are only generating about 15-20 cents of growth for each dollar of debt.

This becomes a larger problem when we think about "growth rates" instead of nominal dollars.

5)
SOCIETY , ECONOMY
Eric Basmajian
Eric Basmajian
@EPBResearch
November Jobs Report Thread

There is both good news and bad news buried in the report.

Most often, too much attention is paid to the headline month on month numbers.

1)


2) In year over year terms, total nonfarm payrolls did not increase for the first time since the pandemic. Generally, this is a negative.


3) Under the hood, most of the decline was in the government sector so it makes more sense to look at private payrolls in this context.


4) Private payroll growth continues to increase but the gains are clearly slowing down - this is to be expected.


5) The troubling part of the report was the labor force participation rate which remains stubbornly low.

As @R_Perli highlighted, if the LFPR does not increase back to pre-COVID levels, we're going to struggle with weaker trend potential growth.

https://t.co/zw7fCZ2gfY
ECONOMY