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Sunday, February 01, 2015

'Demographics and GDP: 2% is the New 4%'

Calculated Risk:

Demographics and GDP: 2% is the new 4%: For amusement, I checked out the WSJ opinion page comments on the Q4 GDP report. As usual, the WSJ opinion is pure politics - but it does bring up an excellent point (that the WSJ conveniently ignores).

First, from the WSJ opinion page:

The fourth quarter report means that growth for all of 2014 clocked in at 2.4%, which is the best since 2.5% in 2010. It also means another year, an astonishing ninth in a row, in which the economy did not grow by 3%.

This period of low growth isn't "astonishing". First, usually following a recession, there is a brief period of above average growth - but not this time due to the financial crisis and need for households to deleverage. So we didn't see a strong bounce back (sluggish growth was predict on the blog for the first years of the recovery).

And overall, we should have been expecting slower growth this decade due to demographics - even without the housing bubble-bust and financial crisis (that the WSJ opinion page missed). ...

The good news is that will change going forward (prime working age population will grow faster next decade). The bad news is the political hacks will continue to ignore demographics.

Right now, due to demographics, 2% GDP growth is the new 4%.

    Posted by on Sunday, February 1, 2015 at 08:27 AM in Economics | Permalink  Comments (59)


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