What Is the New Normal for U.S. Growth?

From John Fernald at the San Francisco Fed:

Estimates suggest the new normal for U.S. GDP growth has dropped to between 1½ and 1¾%, noticeably slower than the typical postwar pace. The slowdown stems mainly from demographics and educational attainment. As baby boomers retire, employment growth shrinks. And educational attainment of the workforce has plateaued, reducing its contribution to productivity growth through labor quality….

Figure 1
Slowing growth in working-age population and labor force

Figure 2
Variation in productivity growth by trend period

There is one other factor that I believe is a major determinant of low productivity gains and hence GDP growth. Private investment — a major contributor to productivity improvement — is declining as a percentage of GDP.

Source: Economic Research | What Is the New Normal for U.S. Growth?