'Potential growth' of US economy is a key question
Morgan Stanley is out with some disheartening research on the US economy. At best, they say US potential growth is only 1.5% per year.
"This estimate takes into account our sobering view of the economy's supply side dynamics that
assumes only a gradual climb in productivity to around 1% per year and very slow growth in the labor force of around 0.5% per year."
They say that in the post-crisis period, growth has averaged 2.1% and unemployment has fallen 4.5 ppts along with slower productivity. They say potential output "appears to have hit a brick wall."
They expect jobs growth of just 50K per month by the end of 2017.
Meanwhile, there are a dozen voices at the FOMC table that think +3% growth is once again right around the corner.
I can't even overstate what the consequences would be if they're right. It points to a dark, Japan-esk economic future.
