During the spring of 2016, the economy stopped worsening. That trend started in mid-2014, when the Fed began the “tightening talk”. As expectations deteriorated strongly in early 2016, the Fed “eased-up”.
That pattern is clear in all production/output indicators and is present in the CLMCI. It´s not a coincidence that conditions in the labor market weakened with the fall in NGDP growth, it is also not a coincidence that labor market conditions stop worsening and show a tenuous upside when NGDP growth reverses the trend.
As we argued in our latest NGDP Outlook:
The basic message remains the same as it has for the last few months. The economy is not about to take off, but at least the growth slump that emerged in early 2016 is abating, and the economy is not getting worse. Indeed the up ticket in market sentiment since the election is not a mirage; it is a measurable signal with economic effects. Those effects, however, are small and mostly evident for the short-run.