What would explain the slowdown in growth, if the culprit isn’t some version of unused capacity? It’s not as if the entire U.S. woke up one morning in 2008 and decided, “I’m going to be less productive today and every day going forward.”…
Investments to expand capacity don’t happen when the capacity that already exists isn’t being used. And it’s not as if one can clap those investments instantly into existence once the slack goes away — the time required to invest has already been forfeited. This lack of investment during the recession probably reduced the country’s economic potential and, with it, the amount of slack it has left.
What’s the evidence that U.S. capacity hasn’t grown much since 2007? To start with, productivity growth is crawlingly slow — averaging just 1 percent over the last few years. That’s a far cry from the late 1990s, when it ran at 3 percent.
Chosen excerpts by Job Market Monitor. Read the whole story at Is This the Best the Economy Can Do? – Bloomberg View.