At Bloomberg Luke Kawa notes that despite better-than-expected employment situation reports, the U. S. economy continues to have the problem that has plagued it for decades:
The manifold headwinds on productivity growth (a mass retirement of the most experienced workers, a prolonged period of rising oil prices before a sharp retreat, the slow integration of new innovative technologies into the production process, and above all, soft business investment) means policy rates will stay even lower throughout this cycle than the subdued levels monetary policymakers think they’ll eventually reach over the long haul, according to Bank of America Merrill Lynch analysts.
The problem will persist as long as policymakers continue to fetishize GDP rather than, say, the median income.
He concludes by warning of a recession to come:
A pick-up in capital spending by businesses will presumably foster a commensurate rise in productivity, which would allow even companies without a large deal of pricing power to avoid choosing between pressuring their profit margins or raising costs for their customers.
Otherwise, as the Deutsche Bank team writes, “this could well be a cycle that does indeed die of old age,” with Corporate America electing to cut jobs to maintain profitability and ultimately fostering a downturn in consumer spending.
That’s unlikely to happen with the present crew of managers who are more interested in padding their compensation plans than they are in building businesses. And they’re just pursuing the incentives before them.
There won’t be another recession until and unless a Republican gets elected President.
And you’ve missed a closing html tag.
Thanks. Fixed.