Is garbage predicting another recession?

 

The graphic, created by economist Michael McDonough, shows how waste/scrap rail shipments correlate with gross domestic product. Recent numbers don't look good. Bloomberg The graphic, created by economist Michael McDonough, shows how waste/scrap rail shipments correlate with gross domestic product. Recent numbers don't look good.

Economist Michael McDonough created this chart a week-and-a-half ago. It compares rail shipments of waste and scrap (reported by the Association of American Railroads) to the United States' gross domestic product. (The year-to-year percent change of waste/scrap shipments is on the left; the year-to-year change in GDP is on the right.)

He's done this before, in 2010. At that time, using almost a decade's worth of data, McDonough figured out that there is an 82.4% correlation between waste/scrap rail shipments and the GDP. It was the best correlation of the 21 shipments that are categorized by the AAR.

As you can see, there's been a sudden and steep drop in waste/scrap rail shipments. It's a drop that looks a lot like 2008-09.

If the historic trends hold true, we are looking at a GDP that might not only be slamming on the brakes but throwing the economy in reverse. If that's true, the effects will be significant -- on business, the economy and, of course, the November election.

The Washington Post's Chris Cillizza calls the graph "fascinating."

I agree, but another word comes to mind, too: yikes.

 

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