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

 
May 02 2018

Simple Math Shows G7 Trend GDP to Slow

An excerpt from our “The Risk of Mistaking Cyclical for Structural" talk given at the Levy Economics Institute’s Minsky Conference, April 17, 2018. –

With regard to the simple math of demographics and productivity growth, what ails the U.S. ails pretty much everybody.

This chart, using similar data as our U.S.-specific analysis, shows the simple math of adding up productivity growth and labor force growth to estimate trend GDP growth for the G7 economies.



The starting coordinate for each country is the 1957-2007 average for productivity growth and labor force growth. The ending coordinates near the arrow heads mark the average productivity growth for the past six years, and potential labor force growth for the next six years, so you see U.S. potential growth is around 1%.

A key aspect of the chart has to do with the slanting brown lines. The horizontal and vertical coordinates add up to 1% for every point on the slanting 1% line -- similarly for the 0% line, and so on.

Clearly, every G7 country is headed in the wrong direction, with potential GDP growth converging toward the 0-1% range. And the red “X” shows Japan’s “lost decades” from 1992, when its post-bubble recession began, to the eve of the financial crisis.

The major economies are heading for even worse predicaments.
 
Click here to download the full presentation, including notes.

Click here to review ECRI’s track record, including member report excerpts.

For more information on ECRI professional services please contact us.

Related News & Events

Interview: Deglobalization and the Fed

Bloomberg April 26, 2018

ECRI’s Achuthan on a structural retreat of globalization, trade and the Fed. More

 

How to Avoid Being Blindsided By the Business Cycle

Real Vision TV May 1, 2018

Highlights from RealVision discussion on the business cycle and the risk of a global recession. More

 

Are We Really "Normalizing?"

Levy Economics Institute April 20, 2018

The danger of confusing cyclical with structural: see slide deck with notes. More

 

The Dog that Didn’t Bark

CNBC April 9, 2018

Unemployment is flat, yet it should be falling if the economy is as strong as most assume. More