Summers' official Treasury portrait.
Summers' official Treasury portrait.

Right now, the U.S. economy is mired in a period of cheap labor, high saving rates, paltry investment, and slow growth, as it has remained since the recession, writes The Wall Street Journal's Jeffrey Sparshott (subscription may be required.)

Many economists argue that "secular stagnation" is to blame for the economy's ills.

Former Treasury Secretary Lawrence Summers is one of the theory’s leading proponents. He worries about chronic low growth, low inflation and low interest rates amid weak demand, excess savings and insufficient investment. Others are more concerned about the supply side, focusing on an aging population and a slowdown in technological progress.

But not everyone is so negative.

Brian Coulton, chief economist at Fitch Ratings, believes a tightening labor market will push companies toward investment and away from saving. He’s already seeing signs of the transition, which will likely coincide with a slower pace of hiring but also greater labor-force participation and higher productivity, according to a research note out Monday.

This isn’t a forecast expecting a return to 4% GDP growth or anything like that. But it’s a relatively optimistic outlook, at odds with some of the high-frequency data in the opening months of the year and contrary to secular-stagnation theses.

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