SF Fed’s Williams: Long Term Economic Landscape to be Defined by “Sea Change” in Demographics, Productivity

June 27, 2017

  • Cites these supply-side factors as causes of global growth slump
  • Says new trend is emerging as countries make post-recession strides while still experiencing lackluster growth; calls it “the big dichotomy of our times”
  • Indicates future consequences yet to be determined; depend mostly on policy choices outside purview of monetary policy

Sydney, Australia — Today, John C. Williams, President and CEO of the Federal Reserve Bank of San Francisco, asserted that a global slowdown in productivity, along with demographic factors like slowing population and labor growth, are behind a global growth slump that is creating a new set of economic challenges for countries worldwide. Speaking at a public forum at Macquarie University, Williams predicted these challenges will define the economic landscape for the next decade and beyond and suggested that their full impact has yet to be determined. 

“As attention has been focused on combatting crises and economic downturns, shifting supply-side realities have been developing that are holding back growth across the globe,” said Williams. “When you look at the underlying demographic and productivity-related shifts, it becomes clear that a sea change is taking shape. What’s less clear is how global policymakers will respond to these shifts.”

Williams indicated that while “the narrative of the past decade has been one of crisis and recovery,” today “there are encouraging signs that we are approaching a turning point; a transition from recovery to ongoing economic expansion.” Meanwhile, countries across the globe are still experiencing lackluster growth, even as they make strides in recovering from the global financial crisis.

“The big dichotomy of our times is that in country after country, the economic news is at once both encouraging and discouraging: Encouraging that economies are expanding; discouraging that growth is disappointing, at least by historical standards,” said Williams.

He cautioned that the global nature of the decline in longer term normal or natural rates of interest “implies that central banks will face daunting challenges in stabilizing their economies in response to negative shocks when interest rates are not far above their lower bound.” Williams also warned that unless trend lines improve, fiscal and other public policymakers will face dramatic increases in unfunded liabilities such as pensions and safety net programs. 

He also suggested that it is not too late for countries to protect against these consequences. “While the causes of the global growth slump are well defined, the consequences are yet to be written—and they will ultimately be shaped by choices that policymakers are grappling with across the globe,” he told the audience.

Williams explained that these choices are mainly beyond the purview of monetary policy. “Our long-term challenges are going to require the sort of long-term investments that fiscal policymakers—and private investors—have within their own toolkits,” he said, “investments in education, job training, infrastructure, research and development; all the things that propel an economy and prosperity over the longer term.”


Matthew Schiffgens
Federal Reserve Bank of San Francisco
(415) 974-3246


The Federal Reserve Bank of San Francisco, with branch offices in Los Angeles, Seattle, Salt Lake City, and Portland, and a cash processing office in Phoenix, provides wholesale banking services to financial institutions throughout the nine western states. As the nation’s central bank, the Federal Reserve System formulates monetary policy, serves as a bank regulator, administers certain consumer protection laws, and is fiscal agent for the U.S. government. Follow us on Twitter at twitter.com/sffed.