Nick Timiraos (WSJ, Economic Growth)
May 19, 2017|
Nick Timiraos (WSJ, Economic Growth) by The Financial Exchange
Transcript - Not for consumer use. Robot overlords only. Will not be accurate.
One of the main goals of Donald Trump's presidential administration is to increase economic growth. From the 2% range up into the three to 4% range and joining us now. Talk about some of the obstacles to to getting there and whether or not it's realistic is picked amber rose from the Wall Street Journal and nick thank you very much for joining us today. Product nick before we go any further let's talk about what GDP growth actually is how how we figure out how fast the economy's actually grown. Right it is it is really too variables it is the the growth of the world course. And the growth in the productivity of those workers so. GDP. Can change over time of course because the economy global recession and demand wolf all I'm an output gap but if you think of kind of a speed limit. Where the economy has kind of a natural rate at which should grow it's really those two factors the labor force and productivity growth. So let's look at the labor force first and anyone who's been pretty much alive in the last fifty years knows that we are simply not growing our population as quickly as we have previously the percent change. In population year over year you go back in the sixties and we are moving up about one and a half to one and three quarters percent. Today we're only grown about three quarters percent per year and we do have an aging population as well so that has to be somewhat. Of a limit her as far as GDP correct. That's exactly right so if you look at what we kind of called a prime working age population. That the population ages 25. To 54. In the 1980s when we had consistent 3% 3.4 percent economic growth. That prime aged population with a spinning at a record 2.2 percent rate and that would be cut that the baby boomers the agent. In to those prime working years. Job now all over the past ten years the working age population has been growing at about zero point 1% a year much slower and so when we've been we've been stuck economists who percent annual growth through competitive at 3% to 4% that we were used to a big piece to that is because for the working age population. Isn't growing. So population has grown that takes this over to productivity. Okay. And breaking at productivity. What do we seen recently and and what does it tell us about our ability to continue to grow GDP here. Well productivity is really hard to measure. And it's it's something that's very hard to predict the future but if you look over the past. That in the past decade productivity growth is really lobbed it's going around zero point 7% a year. That's down from kind of a postwar average of a little under 2%. So I'm not only have we had. Very slow growth in the labor force productivity slowed. And you put those two things together the economy's not gonna grow very about it now economists think that productivity should write come over the next few years. Liked. To get just 3% growth which took the drug administration wants. You would have to grow productivity. Really the highest level that we've seen. In the postwar period or something quotes what we had in the late 1990s when. You have kind of up the fruits of the tech boom rippling through the economy. So here's a question for you I know that one of the the key. Concepts that beat the Kiki ideas that the drug administration is trying to get through congress right now is tax reform. It's it's it's pretty central to their goals of growing the economy and I know the theory is that even though 25 to 54 population growth has slowed. A lot of those people in that range up more today are not working. Than previously were and if you get tax reform done you can get more of those people back into the workforce and growth that way is that something that's realistic. Yet that's the that is the argument is that the millions of people. All who would be working if they could only find it odd jobs that would pay them a decent wage. And until that happens or discomfort on five mindset extruded there'll you know there is there's a few million of those people. But even if you took labor force participation rates back to where they were in 2000 which is the peak that we've had. You you would only boost that that speed limit for growth. From about one point 8% today at 2%. It's just not enough to really move in the also would help and of course anything we can do to get the economy grow faster even if it's not 3%. Is. Is it positive. But there's a debate over what is realistic because if you set out goals. That may be unrealistic for the economy. Then your policies that you might come up with a wrong policies. Looking at productivity on a spin back over their briefly. It seems to be the easiest way that I kind of conceptualize productivity is you take someone who has previously digging ditches with shovels any given a backhoe and all of a sudden he's able to do an awful lot more. Is it possible that just all of the low hanging fruit is gone as far as productivity now and we're just kind of mired in this perpetual slow productivity growth in the US. This is the big debate with economists and you have kind of giants on both sides you have some folks were saying we really. We've we've we've exhausted all of the innovation that. You know the toilet with a much greater innovation in the iPhone right if you had to choose to have only one and so we're glad that oil age right and so the age of innovation is overbooked productivity opportunities that none don't know look at self driving cars yourself drive a truck. There's there's so many different innovations that our World Cup public order and automate this so many different things on our. Artificial intelligence is gonna allow us to take have computers to kind of back office jobs but that raises the tone of the questions because if you Wordock. Have a fleet of self driving trucks what now you've got a bunch of unemployed truck drivers. And the policies and after two Russell that. Very good nick thank you very much of the time today. Victim rose from the Wall Street Journal talking about. GDP growth and whether we can get to that three to 4% range.