US: Potential growth rate in a bearish trend – Wells Fargo

By FXStreet FXStreet (Córdoba) – According to analysts from Wells Fargo, the potential growth rate has likely slowed during the last years and only a substantial rebound in labor force participation or productivity growth could offset aging demographics.

Key Quotes:

“GDP growth has been lackluster since the financial crisis, and many have suggested the potential rate of growth has downshifted in response to the recession. The Congressional Budget Office’s estimates for potential GDP have been revised down significantly in recent years, which they attribute to impacts from the Great Recession as well as trends already in progress before the recession began”

“While potential GDP growth appears to have downshifted in recent years, it is difficult to determine if the current pace will persist.”

“The growth rate of the labor force will likely slow over the coming years compared to the historical pattern since World War II. Much of the slowing growth in the labor component, which has been underway for several decades, was masked by offsetting strong gains in productivity and cyclical increases in employment.”

“Therefore, our base case is for potential GDP growth to remain depressed relative to history. With longer-term growth rates for the working-age population estimated to be at or below …read more

Source:: FX Street