Today we’ll focus on some longer-term economic data which shows, unfortunately, that the US economy is in a multi-decade slide that will be very difficult to reverse. Population growth and worker productivity – the keys to sustained economic growth – are both in decline, trends that are not likely to change anytime soon.
US Gross Domestic Product averaged 3.74% annual growth from 1950 to 1990, but has since slowed dramatically to average only 2.21% from 2010 to 2014. Even worse, worker productivity that averaged 2.5% annual growth from 1948 to 2007 has been slashed by over 50% to only 1.2% annually from 2010 to 2014.
Throughout its history, the US has been a productivity powerhouse. US worker productivity growth averaged around 3% annually during the period 1996-2004, but fell to 1.5% in 2005-2012, and more recently has slipped even further to just above 1%.
What’s at stake is the very future of America. Without faster growth, the US can’t create enough jobs for those who want them, and Americans will have to get used to much smaller increases in their paychecks. The middle class will likely shrink even more, and the poor would be even worse off. Are we doomed to a dimmer future?
The question is, what can be done to reverse these troubling trends? The answers are not simple, nor politically correct in most cases. Another question is, do any of the politicians running today have the knowledge and/or conviction to tackle these critical problems?
That’s what we will talk about today. But before we get to that discussion, let’s look at the Fed’s latest prediction for the economy in the 3Q. The latest GDPNow forecast will surprise you.