Financial Markets Update
Maybe The Recovery Has Been Only Subpar Rather Than Almost Comatose - Why US Growth May Be Understated
In his latest Economic & Market Perspective, WellsCap Chief Investment Strategist Jim Paulsen examines whether recent US economic growth is understated. He concludes that, while "the contemporary recovery has been subpar" ... "there is a fair amount of evidence to suggest that economic growth may be significantly understated in this recovery".
As Jim points out, the growth of investment, consumer spending and job creation in this recovery imply a pace of growth stronger than official reports indicate, perhaps by as much as 1% per year. To examine this, he focuses on the long-standing and close relationship between real wages and productivity growth. With the recovery posting one of the strongest gains in real wages during any recovery since the 1960s, Jim asks, "does it make sense that companies would increase real hourly wages at a historically rapid pace if the real productivity of laborers was weaker than any recovery in the post-war era?"
There is no argument that economic performance in this recovery has been subpar, even if understated in the official numbers. On the other hand, the perception that growth has hovered near "stall speed" since emerging from the Great Recession has produced a recovery focused on fears of recession/deflation risk. If growth has actually been more robust than the headline numbers suggest, the balance of this recovery may be focused on inflation/rising interest rate fears.
Jim's complete Economic & Market Perspective can be accessed here.