The U.S. Economy Is Suffering From the Same Old Problem

From Bloomberg: A pair of better than expected non-farm payrolls reports affirms that the U.S. economy doesn’t have a new problem, that is, a rapid slowdown in job growth — just the same old one: sluggish productivity.

And monetary policymakers will be aiming to ensure that this blight on the U.S. economy disappears as labor slack continues to diminish, according to a Deutsche Bank AG team led by Dominic Konstam. That’s because continued low productivity growth likely entails that businesses aren’t boosting capital spending to increase output at a time when another input to the production process — labor — is becoming more scarce and more expensive.

One “implication of stubbornly low productivity is that it is critically important for the Fed[eral Reserve] to protect aggregate demand, particularly as the pace of payroll expansion slows with full employment looming,” he writes.

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