I admit that positive real GDP growth is an underdog. But here's another case for it:
- Prices have fallen 1-2% since Q3. Thus, nominal GDP has to fall at least 1% if real GDP is going to fall.
- Nominal compensation of employees and proprietor's income (at annual rates) is at least as high in Oct. and Nov. as in Q3. (The well-publicized employment reduction should work through this item).
- Depreciation must be at least as high in Q4 as in Q3, because investment hasn't stopped.
- All of the above means that capital income has to fall at least $144 billion (at annual rates) Q3 to Q4 in order to make real GDP shrink Q3-Q4.
- A $144 billion capital income reduction would far exceed the cumulative reduction in capital income since the beginning of this recession.
- A $144 billion capital income reduction would increase labor's share to 0.683 from 0.659 a year earlier - matching the largest YOY increase in labor's share since WWII.