Graph of the week – the new mediocre

Post with image

Cumulative US GDP growth in the current business cycle expansion (which ‘officially’ began in June 2009) compared to previous periods of US economic expansion

graphSource: BEA, NBER, BNP Paribas Asset Management, as of 31/08/2017

  • The National Bureau of Economic Research (NBER) maintains precise records of  US business cycle expansions and contractions. This week’s graph of the week shows the cumulative level of US GDP growth in the course of the current expansion relative to other periods of economic expansion and versus an average of economic recoveries since 1949.
  • The relatively weak level of economic growth over the course of this economic expansion is all too apparent. To  some extent this weak level of economic growth is a result of the high debt burdens and unemployment that resulted from the global financial crisis. In August 2017 the US unemployment rate was at 4.4%, close to its lowest level in 16 years. Nonetheless it seems that many workers, sidelined during the recession and initial years of the recovery, have yet to reenter the job market.
  • On 26/07/17 the International Monetary Fund (IMF) issued a country report on the US economy. The IMF noted that: “The US is in its third longest expansion since 1850, job growth has been persistently strong, inflation is subdued, and the economy is effectively at full employment. However, like many other advanced economies, the U.S. is confronting secular shifts on multiple fronts. These include technological change that is reshaping labor and product markets, low productivity growth, rising skills premia, and an aging population. Even with high per capita income and one of the most flexible, competitive, and innovative economies in the world, the U.S. model appears to be having difficulties adapting to these changes. Most critically, relative to historical performance, growth has been too low and too unequal. The challenge for the U.S. administration is to realign policies to raise productivity and labor force participation, reduce poverty and income polarization, and help restore the economy’s adaptability and dynamism.”

Written on 31/08/2017

Nathalie Benatia

Strategist

Leave a reply

Your email adress will not be published. Required fields are marked*