Output gap
Potential GDP is what the economy could produce at full employment of labor and capital; the output gap is actual GDP minus that potential. A negative gap means idle capacity — the formal definition of slack; a positive gap means overheating, which feeds inflation.
Why you can't observe it
The gap is an estimate, not a measurement — potential output is inferred from trends and models, and estimates are revised for years. CBO's historical gap estimates have been rewritten substantially, which is why real-time gap readings are a fragile input for decisions.
Where it shows up indirectly
Most recession signals are gap proxies in disguise: claims, industrial production, and sales all measure whether the economy is running below capacity. The composite score is, in effect, a real-time, signal-based estimate that the output gap is widening — without waiting for the theoretical series.