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  • The GFC has spawned a new norm of sub-trend growth. In the US, growth is lacklustre at best, unemployment is stable but participation is declining and the only winners seem to be on Wall Street. Such an economic malady must contend with the major secular trend of technological innovation which will continue to displace jobs over the coming century.

 

(Sub) Growth for the Future

  • America has officially and technically risen out of recession however as the graph below shows, GDP growth remains well below its long run historical average. Just 3.5% per annum in the past seven years, which is almost half the 6.6% average since WW2.

 

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<p> </p>
<ul>
<li>Although this meagre growth has secured a stabilisation of the unemployment rate, it has done little to stem the dual tides of declining participation rates and increasing underemployment. As Barry Bosworth from the Brookings Institute has said, this appears to be a new permanent norm. All this in the context of almost thirty years of effective wage stagnation in the US (wages having only increased by 3% from 1979 to 2014) so it is no wonder that American workers are not pleased.</li>
</ul>
<p> </p>
<h2>The Extraordinary Had No Impact, Except…</h2>
<ul>
<li>This tepid economic growth has been achieved through an extraordinary quantitative easing response from the US Federal Reserve. As shown below, the successive quantitative easing programs are wholly unprecedented in the history of the Fed. As a consequence of these measures, the Fed’s monetary base now totals over US$4 trillion.</li>
</ul>
<p> </p>
<p><img decoding=This update does not constitute financial advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek professional advice before acting or relying on any of the content.

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