An even greater stagnation
By Scott Sumner
The government just announced revised real GDP figures for the past few years, showing even lower growth than previously estimated. I am traveling now so I’m going to estimate these growth rates w/o a calculator. Please correct me if I am wrong. Here are the new growth rates for RGDP, Q4 over Q4:
2015: 1.45%. (So far)
A few comments:
1. This surprises me. I would have thought upward revisions were more likely.
2. If I had to guess, I’d say the speed up in 2013 was due to monetary stimulus, and the continued higher rate in 2014 was due to ending the extended unemployment benefits. But the changes are so small that it’s hard to have any confidence in those claims.
3. This 4 and 1/2 years of sub-2% growth (on average) occurred during a period of rapidly falling unemployment, and above trend employment growth, which means the trend rate of RGDP growth is FAR LOWER. The Fed still hasn’t figured this out.
4. President Obama has done almost nothing (outside trade) to improve the supply-side of the economy, and lots of things to worsen it. Most other recent presidents, of both political parties, make some effort to improve the supply-side fundamentals. On the other hand I think we tend to overrate the importance of presidents, and thus I doubt things would have been much better with another president. The greatest barriers to growth may well be increasing restrictions on immigration and increasing restrictions on property development.
5. I don’t think I’ll ever be able to understand how the government continues to make such large revisions in estimated GDP, so long after the data has come in.