## Q2 Real GDP Per Capita: Less Than Half the Headline Real GDP

### July 29, 2016

### by Doug Short

The Advance Estimate for Q2 GDP, to one decimal, came in at 1.2 percent, up from 1.1 percent in the Q1 Third Estimate. With a per-capita adjustment, the data is less than half the headline number at 0.53 percent. The 10-year moving average illustrates that US economic growth has slowed dramatically since the last recession.

Earlier today we learned that the Advance Estimate for Q2 real GDP came in at 1.2 percent (rounded from 1.22 percent), a rather shocking miss from the mainstream expectation of 2.6 percent. With a per-capita adjustment, the data series is essentially cut in half at 0.53 percent.

Here is a chart of real GDP per capita growth since 1960. For this analysis we've chained in today's dollar for the inflation adjustment. The per-capita calculation is based on quarterly aggregates of mid-month population estimates by the Bureau of Economic Analysis, which date from 1959 (hence our 1960 starting date for this chart, even though quarterly GDP has is available since 1947). The population data is available in the FRED series POPTHM. The logarithmic vertical axis ensures that the highlighted contractions have the same relative scale.

The chart includes an exponential regression through the data using the Excel GROWTH function to give us a sense of the historical trend. The regression illustrates the fact that the trend since the Great Recession has a visibly lower slope than long-term trend. In fact, the current GDP per-capita is 10.3% below the pre-recession trend.

The real per-capita series gives us a better understanding of the depth and duration of GDP contractions. As we can see, since our 1960 starting point, the recession that began in December 2007 is associated with a deeper trough than previous contractions, which perhaps justifies its nickname as the Great Recession.

**Quarterly GDP Compounded Annual Rate of Change**

The standard measure of GDP in the US is expressed as the compounded annual rate of change from one quarter to the next. The current real GDP is 1.2 percent. But with a per-capita adjustment, the data series is lower at 0.53 percent. The 10-year moving average illustrates that US economic growth has slowed dramatically since the last recession.

**Year-Over-Year (YoY) GDP Percent Change and Recession Risk**

Economists and financial journalists vary widely in their opinions about the current level of recession risk. The official call on recessions, of course, is the domain of the National Bureau of Economic Research, which makes the determination on recession start and end several months — sometimes more than a year — after the fact.

GDP per capita, as we've seen, is a weaker series than GDP. What does it suggest about our current recession risk? The next chart shows the YoY change in real GDP per capita since 1960. We've again highlighted recessions. The red dots show the YoY real GDP for the quarter before the recession began, and the dotted line gives us a sense of how the current level compares to recession starts since 1960.

As my friend Bob Bronson of Bronson Capital Markets Research pointed out to us, the current YoY is lower than the 1.32% average value of those eight recession starts in the chart above.

How do the two compare YoY series compare, GDP and GDP per capita? Here is an overlay of the two in the 21st century.

We'll update these charts when the Second Estimate of Q2 GDP is released later this month.

**Other GDP updates:**