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What Is the New Normal for U.S. Growth?

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  • John G. Fernald

Abstract

Estimates suggest the new normal for U.S. GDP growth has dropped to between 1 and 1%, noticeably slower than the typical postwar pace. The slowdown stems mainly from demographics and educational attainment. As baby boomers retire, employment growth shrinks. And educational attainment of the workforce has plateaued, reducing its contribution to productivity growth through labor quality. The GDP growth forecast assumes that, apart from these effects, the modest productivity growth is relatively ?normal??in line with its pace for most of the period since 1973.

Suggested Citation

  • John G. Fernald, 2016. "What Is the New Normal for U.S. Growth?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfel:00108
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    References listed on IDEAS

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    1. Robert J. Gordon, 2016. "The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War," Economics Books, Princeton University Press, edition 1, number 10544.
    2. Charles I. Jones & John C. Williams, 1998. "Measuring the Social Return to R&D," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1119-1135.
    3. John G. Fernald, 1999. "Roads to Prosperity? Assessing the Link between Public Capital and Productivity," American Economic Review, American Economic Association, vol. 89(3), pages 619-638, June.
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    2. Jaeho Kim & Sora Chon, 2022. "Bayesian estimation of the long-run trend of the US economy," Empirical Economics, Springer, vol. 62(2), pages 461-485, February.
    3. John C. Williams, 2017. "Monetary Policy's Role in Fostering Sustainable Growth," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    4. John C. Williams, 2017. "Interest Rates and the \\"New Normal\\"," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    5. Glick, Reuven, 2020. "r* and the global economy," Journal of International Money and Finance, Elsevier, vol. 102(C).

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