Gene Epstein of Barron’s is the latest observer to discuss the potential benefits of tracking a new economic measure dubbed gross output.
How often have we been told that consumer spending accounts for more than two-thirds of the economy, based on the measure called “gross domestic product”? That two-thirds share would be news to many job holders, since most of us don’t earn our money from enterprises that sell directly to consumers.
Of the 125.3 million job holders in the private sector, just 15.3 million are in retailing. Add the millions of others who directly serve consumers in other ways, and you’ll still find that those who work in businesses that sell to other businesses (or to the government) constitute the majority.
The vital importance of business-to-business transactions in the U.S. economy has been captured in a data series released on Friday by the Bureau of Economic Analysis, called “gross output.” BEA Director Steve Landefeld, whose 19-year stewardship has led the agency in many creative directions, told me last week that while he believes gross output is of value at the industry level, he advises against using aggregate GO as a substitute for aggregate GDP.
He does, however, obligingly provide estimates for aggregate GO in the newly released tables. As of 2013’s fourth quarter, the nominal value of U.S. GO came to $30.1 trillion. In contrast, nominal GDP ran at $17.1 trillion, with consumer spending accounting for 68.2% of it. But if we think of gross output as “the economy,” consumer spending accounted for just 38.7%, seemingly a better approximation of reality.
