Chart of the Day: 2 Quarters of Negative Growth!

Merrill Lynch economist Drew Matus has found the holy grail of recession calls: two consecutive quarters of negative growth.

Alright, it's not in the G.D.P. data but the aforementioned G.D.I. numbers adjusted for inflation:

In the fourth quarter of 2007 and first quarter of this year, gross domestic income came in below zero. This Fed paper from last year finds that

"the growth rate of gross domestic income (GDI), deflated by the GDP deflator, has done a better job recognizing the start of recessions than has the growth rate of real GDP. This result suggests that placing an increased focus on GDI may be useful in assessing the current state of the economy."

From Matus:

While not every paper published by the Federal Reserve is useful in determining what value is placed on a particular indicator, GDI makes appearances in FOMC meeting discussions dating back to the early 1990s indicating that movements in this series capture the attention of at least a few Fed officials. Most recently in the minutes of the May 2007 FOMC meeting we see the following:

"Participants discussed how best to reconcile the slowdown in output growth over the past year with the relatively strong performance of the labor market. This apparent tension could partly reflect measurement issues; in particular, participants noted that the more-rapid gains in estimates of gross domestic income over this period might better capture the pace of activity than the modest advances in measured GDP."