There is still a great stagnation

Sam Fleming reports from the FT:

The economist Andrew Smithers singles out a longer-term decline in investment as a share of GDP as a critical drag, as well as a slowdown in education improvements in recent decades. A report by the Aspen Institute and MAPI Foundation on Wednesday warned of a “significant lag in capital investment” in the US and argued this was a major contributor to low productivity growth. Whereas real GDP was in 2014 some 8.7 per cent above its level at the end of 2007, gross private domestic investment was up just 3.9 per cent in the same period, it said.

Productivity in the US rose just 0.6 per cent from a year earlier, according to the figures on Wednesday. San Francisco researchers John Fernald and Bing Wang warned in a note in February that their “best guess” is the relatively slow pace will continue. The implications from such sluggish productivity data are numerous.

The full story is here, interesting throughout.  And here is a related post from Michael Mandel.  Of course you should not infer much from quarterly productivity numbers, but that last quarter did not help, as employment went up a good deal and output did not.

For the pointer I thank Jim Olds.


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