Friday, September 2, 2011

Per Capita Real GDP At 2005 Levels

Chart from EconomPic "Real GDP per Capita at March 2005 Levels" by Jake, below, shows that the per capita real GDP has not grown in the last 6 years. Real per capita GDP has reverted to its March 2005 levels.

While Jake adds a historical long term trend line at 2.15 percent yearly growth, shows the gap between the trend and actual per capita GDP and mentions mean reversion, the uncertainty about the future US economy is the long term trend growth rate line going forward from now.

The longer the future real per capita growth rates are below the historical trend growth rate, the more the entire trend line will move downward and be below the historical yearly growth of 2.15 percent over the period of the chart.

When the average trend growth rate is subject to change and uncertain, mean reversion to the historical trend line from above average growth rates is just as likely as a shift downward in the total trend growth rate line due to a decline in future growth rate below historical average. In other words, actual growth rates can increase to meet up with the long term trend growth or long term trend growth can decline to meet up with lower than average actual future real per capita GDP growth rates.

Only time will tell if future growth rates increase to raise real average per capita GDP growth to the historical growth rate or if the average growth rate will stay below long term trend and cause the long term trend average growth rate to decline. If future growth rates stay below historical trend, the entire trend line will shift down and make the 1950s through the 1990s look like a real per capita GDP growth bubble.

Real Per Capita GDP Chart

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