GDP growth depends on several factors, including growth in the labour force, improvement in labour force productivity, and expansion of public and private capital.
And according to Credit Suisse’s Neal Soss, recent trends in these factors don’t bode well for the future of economic growth in the economy.
This continues a trend of economists who believe that the US economy is in structural decline, and will not escape sluggish growth for a long time to come.
The first chart shows that labour productivity slowed from 3.5% in the late ’90’s to under 1% today.
Chart number 2 shows the decline in labour force participation, as the US’ ageing population continues to drop out of the the workforce.
Chart 3 shows the slowdown in private capital accumulation, measured through net business investment as a share of GDP. According to the report, “This ratio fell to multi-decade lows in the wake of the Great Recession, and the rebound since has been tepid. Slower growth in capital accumulation today is a downside factor for productivity in future years.”
The final chart shows the decline in government investment in infrastructure. While 2009-10 stimulus supported government infrastructure, it has since “declined sharply as as state and local finances deteriorated.”