Why Is the US Economy Sort of Sluggish?

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A new paper from a trio of Fed researchers suggests that our recent sluggish growth is mostly a result of demographic changes and technological slowdown. The retired share of the population has increased, which means the working share of the population has decreased. Since workers are the ones who produce goods and services, it makes sense that GDP growth will slow down in an economy with fewer adults of working age. Ditto for an economy in which technological progress is slackening.

I’ve pointed out the same thing before in the case of Japan, and it makes sense. But how about in the US? The easiest way to see the rough shape of the river is to simply look at GDP per working-age adult. That eliminates most of the demographic issues. When you do this for the US, you get a trendline that still shows a decline in GDP growth: it’s down by about one percentage point since 1978.

You can also look at total factor productivity, which gives us an idea of the effect of technological change that’s independent of demographics. Over the past 60 years, it’s been pretty flat.

Both of these are volatile series, so take them with a grain of salt. That said, productivity hasn’t changed much, but GDP per working-age adult has steadily decreased anyway. This suggests that neither demographics nor technological progress really explains things. So what does?

NOTE: This bit of amateur economics was made possible by a grant from the Committee to Prevent Endless Blogging About Donald Trump. The author thanks them for their generosity.

HERE ARE THE FACTS:

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ONE MORE QUICK THING:

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As we wrote over the summer, traffic has been down at Mother Jones and a lot of sites with many people thinking news is less important now that Donald Trump is no longer president. But if you're reading this, you're not one of those people, and we're hoping we can rally support from folks like you who really get why our reporting matters right now. And that's how it's always worked: For 45 years now, a relatively small group of readers (compared to everyone we reach) who pitch in from time to time has allowed Mother Jones to do the type of journalism the moment demands and keep it free for everyone else.

Please pitch in with a donation during our fall fundraising drive if you can. We can't afford to come up short, and there's still a long way to go by November 5.

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