by Lakshman Achuthan, Co-Founder and Chief Operations Officer of ECRI
ECRI’s Lakshman Achuthan joined Bloomberg TV to discuss low trend growth, productivity, wages, the U.S. economic outlook, and more.
A number of analysts have been ratcheting down their long-term trend GDP growth forecasts, with one well-known house finally reducing theirs from 2¼% to 1¾%. And the cuts are not over yet.
Those still predicting a return to 2½ – 3% long-term GDP growth are essentially betting that productivity growth will rebound to its post-World War II average – around 2¼% per year, even though it has averaged only ½% a year for the past four years. Indeed, we are now in what one could call a “productivity recession” – back-to-back quarterly declines in productivity.
This puts the Fed in a bind: as falling trend growth caps bond yields, how much can they really tighten before parts of the yield curve invert?
