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GDI, or Gross Domestic Income, is a measure of “total income received by all sectors of an economy within a nation. It includes the sum of all wages, profits, and taxes, minus subsidies.” (Thanks, Wikipedia.)

But why do we care?

The GDI should theoretically be equal to GDP, as The Economist explains, but appears to be different, and in an important (and depressing) way.

By the light of GDI, the American economy looks a bit more pallid. According to the income measure, activity slowed at a 7.3% annual rate in the fourth quarter of 2008. GDP, meanwhile, recorded a 5.4% drop. And in the third quarter of 2009 (the most recent for which income data are available), GDI continued to contract while GDP notched up the increase that led many economists to announce the end of the recession.

The picture painted by GDI throughout the downturn is one of an economy substantially weaker than indicated by GDP: one more in line with the employment data and with the experience of most Americans. But whether productivity or unexpectedly weak growth is to blame for high unemployment, there is a danger that policymakers have failed to recognise the full extent of the slack in the economy. The result may be a disappointingly slow, fragile and jobless exit from recession.

~alex