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Michael Bauer, senior economist at the Federal Reserve Bank of San Francisco, stated his views on the current economy and the outlook as of August 11, 2016.
The “natural” rate of interest—the real rate consistent with full use of economic resources and steady inflation near the Fed’s target level—is an important benchmark for monetary policy. Current estimates suggest that this rate is near zero, but it is expected to rise gradually in the years ahead as real GDP returns to its long-run potential. If the historical statistical relationship between the growth rate of potential GDP and the natural rate holds true in the future, then a 2% long-run growth rate would imply a long-run natural rate of around 1%.
What is the sustainable pace of GDP growth in the U.S.? A plausible point forecast has GDP per capita rising well under 1% per year in the longer run, with overall GDP growth a little over 1½%. The main drivers of slow growth are educational attainment and demographics. First, rising educational attainment will add less to productivity growth than historically. Second, as baby boomers age, employment will rise more slowly than population. This forecast assumes productivity growth is relatively “normal,” if modest—in line with its general pace since 1973. An upside risk is another burst of IT-induced productivity growth.
The personal consumption expenditure price index (PCEPI) is one measure of U.S. inflation. The PCEPI measures the percentage change in prices of goods and services purchased by consumers throughout the economy.
The Tech Pulse Index is an index of coincident indicators of activity in the U.S. information technology sector. It can be interpreted as a summary statistic that tracks the health of the tech sector in a timely manner.
This site presents a real-time, quarterly series on total factor productivity (TFP) for the U.S. business sector, adjusted for variations in factor utilization - labor effort and capital's workweek.
The Wage Rigidity Meter offers a closer examination of the annual wage changes of U.S. workers that have not changed jobs over the year.