Do not follow the leader: 7 days of Economics
- US growth slowed in end-2016
- Final domestic demand rebounded
- 2016 as a whole was particularly weak
2016 as a whole marked a slowdown.The average annual growth stands at 1.6%, the second weakest performance since the US emerged from the Great Recession. In nominal terms, 2016 was the worst year. This is quite conflicting with the apparent strength of the labour market. In December 2016, the unemployment rate was as low as 4.7%,as close to 2.5 million jobs have been created. How come employment can be dynamic in a soft economy? Answering that question is long and complex while not always consensual. What is unquestionable is that 2016 saw Corporate America spending cutting on investment while hiring: less capital and more labour. This is clearly the recipe for actual and projected productivity.
Consequences are clear but how about causes? Well, it might be interesting to think in terms of relative prices, having in mind how weak real wages have been in the recent past.