It has been 5 years and 5 days since the official end of the recession. Total national output has now edged significantly above its prerecession peak, but economic growth has average only about 2% a year during the recovery, well below its historic average. As indicated by writer Binyamin Applebaum and others, household incomes continue to stagnate and unemployment remains elevated. Ours is a society that has become accustomed to 3% growth.
Even after the Great Depression of the 1930s, growth eventually returned to an average pace exceeding 3% per year, but this just hasn’t happened in recent years and increasingly people are adopting a view that it won’t. Treasury Secretary Jack Lew recently stated that the government now expects annual growth to average just 2.1 percent, or about two-thirds of its previous pace. Many economists attribute America’s slowed pace of growth to a lack of investment in infrastructure.
Others point to the end of a technology adoption cycle, which implies slower productivity growth during the years ahead. Three senior Federal Reserve economists recently argued that productivity growth could continue to stagnate as fewer new businesses are formed and as existing ones spend less on research and development.