Today we share a series of charts on GDP growth potential, which is a function of two independent variables: growth in the labor force and productivity gains
Reminder: These charts come to us compliments of independent economist Fritz Meyer, a seasoned economic and markets analyst whose insights appear regularly on CNBC, Bloomberg TV and the Fox Business Network. Here is what Fritz has to say about GDP growth potential:
U.S. GDP growth is already running at its full calculated potential.
How many times have you heard these descriptors applied to the U.S. economy: Secular stagnation? Stall speed? Limping along? And, sub-par, anemic, struggling and stuck in first gear? None of these are correct but they are, without a doubt, the popular perception. The reasons for this disconnect? Pundits’ expectations are stuck in previous decades when higher growth rates were fundamentally achievable; and b) politicians pandering for votes in the current election campaign like to keep telling Americans how lousy this economic expansion has been and how they have the plan to rev it up.
The nation’s economic growth is a function of two independent variables: growth in the labor force and productivity gains. The BLS, in its latest, December 2015, 10-year economic forecast is projecting 2.3% GDP for the 10-year period through 2024, based on an estimated +0.5% growth in the labor force plus +1.8% annual productivity gains.
Another way to look at this +2.3% 10-year GDP growth forecast is to consider that it represents the U.S. economy’s maximum-rated economic speed. The economy simply cannot sustain a faster growth rate, eg. the 4% and then the 3% that it consistently knocked out in previous decades, given today’s fundamental growth drivers. To expect a return to, say, a sustained +3% growth rate, is just not realistic.
Clicking on each chart will maximize it in your browser.