The 2.1% average growth in real gross domestic product since the Great Recession ended has become a source of great controversy, says MarketWatch's Caroline Baum.
On one side, sit the bulls.
The economic bulls maintain that the price of information technology is being overstated, which means real GDP and productivity growth are being understated. For this group, the low level of both jobless claims and the unemployment rate is telling the true story of a robust economy that isn’t being captured by the statisticians.
But the Bears may make a stronger case.
In addition to slow GDP and productivity growth, capital spending has been among the weakest of any post-war expansion. Business startup activity, which usually tracks the business cycle, increased for the first time in 2015 after a five-year slide, according to the Kauffman Foundation. Solid job growth, rather than a sign of strength, is a reflection of lousy labor productivity. With hiring concentrated in the labor-intensive service sector, employers are, in effect, substituting labor for capital.
What’s more, with the rest world growing “too slow for too long,” according to the International Monetary Fund, even in the face of ultra-low or negative interest rates, the U.S. can’t count on international demand to prop up demand.
Ultimately, Baum concludes that were probably looking at 2% growth.
Short of structural changes that increase the economy’s capacity to grow — the next new thing in technology and skills-based immigration reform — 2% is as good as it gets.