The Slow Recovery in Output after 2009

Robert Hall, Mark Watson, James Stock and John Fernald ()
Additional contact information
Robert Hall: Stanford University
James Stock: Harvard

No 610, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: The U.S. economy has been expanding slowly since the recession trough in 2009. Though unemployment has declined at about the same rate as in previous recoveries, output has grown much more slowly than in the past. We explore explanations for the shortfall in output growth, using a quantitative decomposition based on growth economics. Two components of the decomposition stand out: slow growth in productivity, and a growing shortfall of labor-force participation relative to its demographic determinants. The slow growth in both components predated the recession. Our analysis gives a full treatment to cyclical effects. Our conclusion is that powerful non-cyclical forces at least partially unrelated to the financial crisis of 2008 account for the poor record of output growth during the ongoing recovery from the crisis-induced recession. This combination of the adverse cyclical influence, and the noncyclical forces we study, resulted in a shortfall of capital formation that holds back output even today.

Date: 2017
New Economics Papers: this item is included in nep-mac
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