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Unit Labor Costs Predicting Deflation

David Rosenberg, chief economists at Gluskin Sheff, has the following interesting graph:



The graph (upper left corner), shows a value R = 82%.  The title of the graph refers to an 82% correlation.  Both can not be right.

The correlation is R-squared.  If the correlation is 82%, then the graph is mislabeled.  If the graph label is correct, then R-squared = 67% = correlation and the title is wrong.

Note:  I classify R-squared 80% to 90% as good correlation and 60% to 80% as fair correlation.  You are welcome to contribute your own characterizations.

Other characterizations:

1.  90% to 100% is excellent.  Of course, 100% is perfect correlation.
2.  40% to 50% is weak.
3.  20% to 40% is poor.
4.  Below 20% is no significant correlation.  Of course, 0% is random scatter, exactly zero correlation.

Disclosure: No stocks mentioned.