Economists generally agree that productivity is the primary ingredient for sustainable growth in GDP and wages. The August productivity data release provided some clarification regarding trend—or long-run—GDP growth, but the news was not good: Following a resurgence of strong productivity growth in the late 1990s and early 2000s after nearly a quarter-century of slow growth beginning in 1973, the latest reading from a trend tracking model now indicates that slow productivity growth returned in 2004. In this post, we describe our “regime-switching” productivity model and share the model’s insights into the historical profile of high- and low-growth regimes as well as the outlook for productivity.
2004 is the point at which the Fed began chasing inflation. This needs some data and thought!
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