The US and global recoveries have been “disappointing” so far and may point to a permanent downshift in economic potential, US Federal Reserve vice-chair Stanley Fischer said on Monday.
In an overview of the years since the 2007-2009 financial crisis and recession, Fischer said a slowing of US productivity, declining labour force participation and other factors may have scarred the United States’ ability to generate economic growth.
The same thing may be happening for different reasons in Europe, large emerging economies such as China, and elsewhere, he said, forcing central bankers to recast their understanding of inflation, employment and growth in general.
“The global recovery has been disappointing,” Fischer said in prepared remarks for a speech to an economic conference in Sweden. Long-run annual growth in the United States may now be perhaps as low as 2%, a full percentage point below the estimate of Fed policymakers as recently as 2009, he said.
Some of that may represent temporary factors that will change if, for example, the US housing market improves.
“But it is also possible that the underperformance reflects a more structural, longer-term shift in the global economy,” he added.
via The Guardian