After puzzling for years over the sluggish U.S. rebound from the 2007-2009 recession, the Federal Reserve had a reckoning at its policy meeting in September of 2016.
Because of poor productivity and population aging, typical U.S. economic growth of 2.5% or more annually was “not possible anymore” on a sustained basis, said John Williams, the current New York Fed president who at the time was head of the San Francisco Fed, according to transcripts of a session where policymakers cut their median long-term GDP growth outlook to 1.8%, continuing a roughly decade-long slide.
For the next three years and continuing on the other side of a world-altering pandemic, the U.S. has left that seeming constraint in the dust, with growth exceeding 1.8% in 21 of the 28 quarters since, including a period of 2.5% annual growth in the years between that 2016 Fed meeting and the onset of the coronavirus pandemic, and averaging 3% so far under President Joe Biden.
The pandemic, with its massive hit to growth in two of those quarters in 2020 and the multi-trillion-dollar government response that followed, clouds an understanding of emerging trends.
But when policymakers gather later this week for an annual Fed research symposium in Jackson Hole, Wyoming that will be focused on “structural shifts,” they will have to grapple with an economy in deep flux – from U.S. labor force growth that has been better than anticipated, a manufacturing construction surge, changing global supply chains, continued high inflation, and, now, hints of improving productivity.
Source : Reuters
