Eric Basmajian
@epbresearch.bsky.social
The economy moves in a sequence. Read it before consensus does. Free Sunday Newsletter: https://www.epbresearch.com/newsletter
America invests as much of its output as it ever has. That statement is true, but completely misleading. Gross investment counts every dollar spent. Net investment is the part that grows the capital stock, and it's near a multi-decade low.
Eric Basmajian@epbresearch.bsky.social · yesterdayEveryone is arguing about whether AI capex is a bubble. It's a reasonable debate, but it's the wrong one. Computer equipment investment went from 0.5% of GDP to 1.3% in 3 years, past the dot-com peak. All while total net investment is still near its lowest share outside 2009.
Eric Basmajian@epbresearch.bsky.social · yesterday
‘A profit pool supported increasingly by fiscal deficits is structurally different from one supported primarily by private investment.‘ blog.epbresearch.com/p/where-do-r... by @epbresearch.bsky.social
Business investment in computer equipment has increased from 0.5% to 1.3% of GDP in less than 3 years. Higher than the Dot-Com peak.
80% of the time, the economy was better than today. That's the subject of this Sunday's upcoming newsletter. Join for free here: epbresearch.com/newsletter
Over the last six months: - Total employment level fell by 1.728 million. - Total labor force declined by 2.137 million. As a result, the unemployment rate declined 0.2%. The employment-population ratio declined 0.7%.
Hm... I think this has to be reconciled. If supply can't explain it, perhaps it's demand. (h/t @epbresearch.bsky.social for the chart!)
Adjusted for inflation, America now adds less housing per household than it did in the late 1960s, even as the cost of building it has far outpaced almost everything else.
The US cannot inflate its way out of its fiscal problems. This is a myth. All the future obligations are index-linked to inflation. All you’ll do with this idea is widen the wealth divide between the recipients of the inflation-indexed payments and wage earners.
The market is better at calling the end of a recession than the beginning. Here's the part of the economy that actually leads the cycle, and how to track it. epbresearch.substack.com/p/the-stock-...
The Stock Market Is Not a Leading Indicator. This Is.
The market is better at calling the end of a recession than the beginning. Here's the part of the economy that actually leads the cycle, and how to track it.
epbresearch.substack.com
Is construction employment rising or falling? Both. Residential building has eased from its 2024 peak, while non-residential building continues to climb to new highs.
Where does American income come from? Less and less of it comes from work. Wages have fallen from 73% of personal income in 1970 to 60.5% today. Income from assets and transfers like Social Security and Medicare has climbed from 23% to 39%.
This isn’t a "big tech" thing as much as it is industry consolidation everywhere, allowing companies to extract closer to monopoly rents.
Eric Basmajian@epbresearch.bsky.social · 2mo agoFor 50 years, US corporate profit margins always reverted to a 9–16% range. That rule may be breaking. Economy-wide margins just hit an all-time high of 20.6%, and the old ceiling looks gone for good.
Corporate profit margins just hit 20.6%, the highest on record. At the same time, the typical worker's pay has stalled and slipped below its long-term trend. In this post, I break down how this happened and where it ultimately leads. epbresearch.substack.com/p/record-pro...
Record Profits, Falling Paychecks
US corporate margins just hit an all-time high while the typical worker's income slips below trend. The two are connected, and the reason isn't what most people think.
epbresearch.substack.com
For 50 years, US corporate profit margins always reverted to a 9–16% range. That rule may be breaking. Economy-wide margins just hit an all-time high of 20.6%, and the old ceiling looks gone for good.
Less than 20% of GDP drives 100% of recessions. Three components: Residential investment. Durable goods consumption. Business equipment investment. Today, only residential is contracting. One of three. Not enough to break the cycle.
Real personal income per capita is falling apart. It's now $3,842 below the 2009-2020 trend and accelerating lower. It keeps getting worse for the average American, and Main Street can feel it. Meanwhile...
Computer equipment investment is part of the 20% of the economy that drives 100% of recessions. That’s why it’s having such an important impact on the business cycle and recession odds. Watch Cyclical GDP. Ignore everything else. open.substack.com/pub/epbresea...
The 20% of the Economy That Drives 100% of Recessions
Why conventional analysis fails — and the three sectors you should actually be watching.
open.substack.com
Consumer spending is 70% of GDP. But 52% of it is recession-proof. Another 30% barely moves. Only 16% actually drives the cycle. This chart shows the full breakdown, ranked by cyclicality:
You cannot grow your way out of the debt when the debt itself is suppressing growth.
Building permits and units under construction both track the housing cycle. One runs a year or more ahead of the other. Permits are leading, construction is the cyclical layer that follows. The gap between the two lines is your lead time.
‘Housing was stabilizing for the first time in three years. Then the war reignited inflation and pushed mortgage rates higher, threatening the brewing recovery in the economy's most important sector.’ blog.epbresearch.com/p/the-iran-w... by @epbresearch.bsky.social
The Iran War Just Derailed the Housing Recovery
Housing was stabilizing for the first time in three years. Then the war reignited inflation and pulled the one variable holding the recovery together. Here's where the sequence stands.
blog.epbresearch.com
If you haven't grabbed our free PDF guide to the housing cycle, you can download it here: epbresearch.com/housing Residential construction is the most important and leading part of the overall economy, and it follows a predictable set of steps. We outline a 5-step process.
The Iran War's real economic damage isn't oil or the consumer. It's housing. A spike in mortgage rates may have just derailed the first signs of a housing recovery in three years. The full sequence, and where it stands now:
Eric Basmajian@epbresearch.bsky.social · 2mo ago
