My piece in today’s Wall Street Journal “A Recovery Waiting to Be Liberated,” starts with data showing that economic growth last year was in the end disappointing again. So far this year it looks even worse: Macroeconomic Advisers one of the best shops for now-forecasting, estimates only 1.9% in the first quarter of this year after light vehicle sales in February were disappointing. We need to get started with the reforms.
Another way to think about work by Chris Erceg and Andrew Levin (mentioned in the WSJ article) is that were it not for the unusual drop in the labor force, the unemployment rate would be 3 percentage points higher, say 8.7% rather than 5.7%.
So in several ways the U.S. economy resembles an economy at the bottom of a recession ready for a post-recession boom. This is because the economy has crawled along at a pace no greater than the pre-recession trend, leaving a gap of unrealized potential that can be closed with rapid growth for a few years