Contact

A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

All Reports

 
Jun 25 2015

Fed Hopes for Pickup in Productivity, Settles for Disappointment

With the U.S. in what one might call a “productivity recession” – given back-to-back quarters of negative productivity growth – Fed Chairman Yellen remains hopeful that productivity growth will return to its long-term trend, while allowing that “it’s conceivable that… [it] disappoints.” Of course, the Fed could also gauge productivity growth prospects by examining real interest rates, which reflect long-term U.S. growth prospects. In theory, yields would rise if long-term growth was expected to be higher, implying higher returns on investment, spurring further investment; and increasing future earnings, incentivizing households to consume more and save less.

Our latest research examines the historical relationship between U.S. real interest rates and productivity growth, complementing our earlier work on trend GDP growth. Indeed, it seems that, while remaining hopeful, the Fed is also becoming more realistic about productivity growth prospects.

Related News & Events

The Wage Inflation Deception

ECRI June 24, 2015

"There is nothing more deceptive than an obvious fact." More

 

Shifting Patterns in Recessions and Recoveries

ECRI June 17, 2015

Slides and notes from Madrid Fund Forum Conference. More

 

Simple Math: ½% + ½% = 1%

ECRI June 11, 2015

With productivity growth and potential labor force growth both averaging ½% a year, trend real GDP growth is converging to 1% a year. More

 

Related Reports