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Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to learn more.

"... In the Chart of the Day below we show the spread between Nominal GDP growth and Nominal Wage Growth (aggregate wage income). The intuition for understanding the profitability implications comes from viewing the macroeconomy as you would a company or household. At the aggregate level, Nominal GDP equals National Income or Total Revenue. Aggregate Wages represent Costs (labor costs are typically the biggest input costs for firms).


If costs are growing faster than revenue - which is the case currently and is represented by a negative spread in the chart below – margins and earnings growth becomes increasingly challenged. If labor growth continues to grow at a premium to output growth and if aggregate wages continue to grow at a positive spread to revenues (nominal GDP) then productivity will remain negative and the corporate earnings recession will remain more-or-less the prevailing reality."

CHART OF THE DAY: It's Just Math... - Nominal GDP less Nominal Wage Growth CoD