Working Paper: NBER ID: w23543
Authors: John G. Fernald; Robert E. Hall; James H. Stock; Mark W. Watson
Abstract: U.S. output has expanded only slowly since the recession trough in 2009, even though the unemployment rate has essentially returned to a pre-crisis, normal level. We use a growth-accounting decomposition to explore explanations for the output shortfall, giving full treatment to cyclical effects that, given the depth of the recession, should have implied unusually fast growth. We find that the growth shortfall has almost entirely reflected two factors: the slow growth of total factor productivity, and the decline in labor force participation. Both factors reflect powerful adverse forces that are largely unrelated to the financial crisis and recession—and that were in play before the recession.
Keywords: output growth; total factor productivity; labor force participation; economic recovery
JEL Codes: E22; E24; E32; J21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| slow growth of total factor productivity (TFP) (O49) | disappointing recovery of output post-2009 (O49) |
| decline in labor force participation (J21) | disappointing recovery of output post-2009 (O49) |
| pre-existing trends (F44) | slow growth of total factor productivity (TFP) (O49) |
| demographic shifts (J11) | decline in labor force participation (J21) |
| capital-output ratio remains stable (E23) | investment levels not significantly impacted by recession (E20) |
| unemployment rate (J64) | output (C67) |