IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/23543.html
   My bibliography  Save this paper

The Disappointing Recovery of Output after 2009

Author

Listed:
  • John G. Fernald
  • Robert E. Hall
  • James H. Stock
  • Mark W. Watson

Abstract

U.S. output has expanded only slowly since the recession trough in 2009, even though the unemployment rate has essentially returned to a pre-crisis, normal level. We use a growth-accounting decomposition to explore explanations for the output shortfall, giving full treatment to cyclical effects that, given the depth of the recession, should have implied unusually fast growth. We find that the growth shortfall has almost entirely reflected two factors: the slow growth of total factor productivity, and the decline in labor force participation. Both factors reflect powerful adverse forces that are largely unrelated to the financial crisis and recession—and that were in play before the recession.

Suggested Citation

  • John G. Fernald & Robert E. Hall & James H. Stock & Mark W. Watson, 2017. "The Disappointing Recovery of Output after 2009," NBER Working Papers 23543, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:23543
    Note: EFG LS
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w23543.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bresnahan, Timothy F. & Trajtenberg, M., 1995. "General purpose technologies 'Engines of growth'?," Journal of Econometrics, Elsevier, vol. 65(1), pages 83-108, January.
    2. Robert J. Gordon, 2016. "The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War," Economics Books, Princeton University Press, edition 1, number 10544.
    3. Dale W. Jorgenson & Mun S. Ho & Kevin J. Stiroh, 2008. "A Retrospective Look at the U.S. Productivity Growth Resurgence," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 3-24, Winter.
    4. Philippe Aghion & Antonin Bergeaud & Timo Boppart & Peter J. Klenow & Huiyu Li, 2019. "Missing Growth from Creative Destruction," American Economic Review, American Economic Association, vol. 109(8), pages 2795-2822, August.
    5. Robinson, Peter M, 1988. "Root- N-Consistent Semiparametric Regression," Econometrica, Econometric Society, vol. 56(4), pages 931-954, July.
    6. Robert J. Gordon, 2014. "A New Method of Estimating Potential Real GDP Growth: Implications for the Labor Market and the Debt/GDP Ratio," NBER Working Papers 20423, National Bureau of Economic Research, Inc.
    7. Michelle Alexopoulos & Jon Cohen, 2011. "Volumes of evidence: examining technical change in the last century through a new lens," Canadian Journal of Economics, Canadian Economics Association, vol. 44(2), pages 413-450, May.
    8. Germán Gutiérrez & Thomas Philippon, 2017. "Investmentless Growth: An Empirical Investigation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 48(2 (Fall)), pages 89-190.
    9. Petrosky-Nadeau, Nicolas, 2013. "TFP during a credit crunch," Journal of Economic Theory, Elsevier, vol. 148(3), pages 1150-1178.
    10. Fatas, Antonio, 2000. "Do Business Cycles Cast Long Shadows? Short-Run Persistence and Economic Growth," Journal of Economic Growth, Springer, vol. 5(2), pages 147-162, June.
    11. Ryan A. Decker & John Haltiwanger & Ron S. Jarmin & Javier Miranda, 2016. "Declining Business Dynamism: What We Know and the Way Forward," American Economic Review, American Economic Association, vol. 106(5), pages 203-207, May.
    12. Congressional Budget Office, 2014. "The Slow Recovery of the Labor Market," Reports 45011, Congressional Budget Office.
    13. Susanto Basu & John G. Fernald & Nicholas Oulton & Sylaja Srinivasan, 2004. "The Case of the Missing Productivity Growth, or Does Information Technology Explain Why Productivity Accelerated in the United States but Not in the United Kingdom?," NBER Chapters, in: NBER Macroeconomics Annual 2003, Volume 18, pages 9-82, National Bureau of Economic Research, Inc.
    14. Christopher J. Erceg & Andrew T. Levin, 2014. "Labor Force Participation and Monetary Policy in the Wake of the Great Recession," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(S2), pages 3-49, October.
    15. John G. Fernald, 2015. "Productivity and Potential Output before, during, and after the Great Recession," NBER Macroeconomics Annual, University of Chicago Press, vol. 29(1), pages 1-51.
    16. Stephanie Aaronson & Bruce Fallick & Andrew Figura & Jonathan Pingle & William Wascher, 2006. "The Recent Decline in the Labor Force Participation Rate and Its Implications for Potential Labor Supply," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 37(1), pages 69-154.
    17. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
    18. Blanchard, Olivier & Lorenzoni, Guido & L’Huillier, Jean-Paul, 2017. "Short-run effects of lower productivity growth. A twist on the secular stagnation hypothesis," Journal of Policy Modeling, Elsevier, vol. 39(4), pages 639-649.
    19. Nathan Goldschlag & Alex Tabarrok, 2018. "Is regulation to blame for the decline in American entrepreneurship?," Economic Policy, CEPR;CES;MSH, vol. 33(93), pages 5-44.
    20. John G. Fernald & J. Christina Wang, 2016. "Why Has the Cyclicality of Productivity Changed? What Does It Mean?," Annual Review of Economics, Annual Reviews, vol. 8(1), pages 465-496, October.
    21. David M. Byrne & John G. Fernald & Marshall B. Reinsdorf, 2016. "Does the United States Have a Productivity Slowdown or a Measurement Problem?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 47(1 (Spring), pages 109-182.
    22. Dave Reifschneider & William Wascher & David Wilcox, 2015. "Aggregate Supply in the United States: Recent Developments and Implications for the Conduct of Monetary Policy," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 63(1), pages 71-109, May.
    23. Janet L. Yellen, 2016. "Macroeconomic Research After the Crisis : a speech at \"The Elusive 'Great' Recovery: Causes and Implications for Future Business Cycle Dynamics\" 60th annual economic conference sponsored b," Speech 915, Board of Governors of the Federal Reserve System (U.S.).
    24. Stephanie Aaronson & Tomaz Cajner & Bruce Fallick & Felix Galbis-Reig & Christopher Smith & William Wascher, 2014. "Labor Force Participation: Recent Developments and Future Prospects," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 45(2 (Fall)), pages 197-275.
    25. Cette, Gilbert & Fernald, John & Mojon, Benoît, 2016. "The pre-Great Recession slowdown in productivity," European Economic Review, Elsevier, vol. 88(C), pages 3-20.
    26. Decker, Ryan A. & Haltiwanger, John & Jarmin, Ron S. & Miranda, Javier, 2016. "Where has all the skewness gone? The decline in high-growth (young) firms in the U.S," European Economic Review, Elsevier, vol. 86(C), pages 4-23.
    27. Congressional Budget Office, 2014. "The Slow Recovery of the Labor Market," Reports 45011, Congressional Budget Office.
    28. Caballero, Ricardo J & Hammour, Mohamad L, 1994. "The Cleansing Effect of Recessions," American Economic Review, American Economic Association, vol. 84(5), pages 1350-1368, December.
    29. Mary C. Daly & John G. Fernald & Òscar Jordà & Fernanda Nechio, 2013. "Shocks and Adjustments," Working Paper Series 2013-32, Federal Reserve Bank of San Francisco.
    30. Chad Syverson, 2017. "Challenges to Mismeasurement Explanations for the US Productivity Slowdown," Journal of Economic Perspectives, American Economic Association, vol. 31(2), pages 165-186, Spring.
    31. Congressional Budget Office, 2012. "What Accounts for the Slow Growth of the Economy After the Recession?," Reports 43707, Congressional Budget Office.
    32. Gustavo Adler & Romain A Duval & Davide Furceri & Sinem Kılıç Çelik & Ksenia Koloskova & Marcos Poplawski Ribeiro, 2017. "Gone with the Headwinds; Global Productivity," IMF Staff Discussion Notes 17/04, International Monetary Fund.
    33. J. B. Taylor & Harald Uhlig (ed.), 2016. "Handbook of Macroeconomics," Handbook of Macroeconomics, Elsevier, edition 1, volume 2, number 2, December.
    34. Congressional Budget Office, 2012. "What Accounts for the Slow Growth of the Economy After the Recession?," Reports 43707, Congressional Budget Office.
    35. Robert Hall & Nicolas Petrosky-Nadeau, 2016. "Changes in labor participation and household income," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    36. Alexander J. Field, 2003. "The Most Technologically Progressive Decade of the Century," American Economic Review, American Economic Association, vol. 93(4), pages 1399-1413, September.
    37. Congressional Budget Office, 2012. "What Accounts for the Slow Growth of the Economy After the Recession?," Reports 43707, Congressional Budget Office.
    38. Congressional Budget Office, 2014. "The Slow Recovery of the Labor Market," Reports 45011, Congressional Budget Office.
    39. Diego Anzoategui & Diego Comin & Mark Gertler & Joseba Martinez, 2019. "Endogenous Technology Adoption and R&D as Sources of Business Cycle Persistence," American Economic Journal: Macroeconomics, American Economic Association, vol. 11(3), pages 67-110, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alexander Murray, 2017. "What Explains the Post-2004 U.S.Productivity Slowdown?," CSLS Research Reports 2017-05, Centre for the Study of Living Standards.
    2. Goldin, Ian & Koutroumpis, Pantelis & Lafond, François & Winkler, Julian, 2020. "Why is productivity slowing down?," MPRA Paper 99172, University Library of Munich, Germany.
    3. Cette, Gilbert & Fernald, John & Mojon, Benoît, 2016. "The pre-Great Recession slowdown in productivity," European Economic Review, Elsevier, vol. 88(C), pages 3-20.
    4. John Fernald, 2017. "Is there an easy cure for low growth?," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 52(3), pages 175-180, July.
    5. Francesco Manaresi & Nicola Pierri, 2018. "Credit supply and productivity growth," Temi di discussione (Economic working papers) 1168, Bank of Italy, Economic Research and International Relations Area.
    6. Francesco Manaresi & Nicola Pierri, 2018. "Credit supply and productivity growth," BIS Working Papers 711, Bank for International Settlements.
    7. Ekaterina Prytkova, 2021. "ICT's Wide Web: a System-Level Analysis of ICT's Industrial Diffusion with Algorithmic Links," Jena Economic Research Papers 2021-005, Friedrich-Schiller-University Jena.
    8. Oscar Jorda & Alan Taylor & Sanjay Singh, 2019. "The Long-Run Effects of Monetary Policy," 2019 Meeting Papers 1307, Society for Economic Dynamics.
    9. John G. Fernald, 2015. "Productivity and Potential Output before, during, and after the Great Recession," NBER Macroeconomics Annual, University of Chicago Press, vol. 29(1), pages 1-51.
    10. David Byrne & Stephen D. Oliner & Daniel E. Sichel, 2017. "Prices of high-tech products, mismeasurement, and the pace of innovation," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 52(2), pages 103-113, April.
    11. Garga, Vaishali & Singh, Sanjay R., 2021. "Output hysteresis and optimal monetary policy," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 871-886.
    12. Furceri, Davide & Kilic Celik, Sinem & Jalles, João Tovar & Koloskova, Ksenia, 2021. "Recessions and total factor productivity: Evidence from sectoral data," Economic Modelling, Elsevier, vol. 94(C), pages 130-138.
    13. Janice C. Eberly & James H. Stock & Jonathan H. Wright, 2020. "The Federal Reserve's Current Framework for Monetary Policy: A Review and Assessment," International Journal of Central Banking, International Journal of Central Banking, vol. 16(1), pages 5-71, February.
    14. Elstner, Steffen & Rujin, Svetlana, 2019. "The consequences of U.S. technology changes for productivity in advanced economies," Ruhr Economic Papers 796, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    15. Miyagawa, Tsutomu & Tonogi, Konomi & Ishikawa, Takayuki, 2021. "Does the productivity J-curve exist in Japan?-Empirical studies based on the multiple q theory," Journal of the Japanese and International Economies, Elsevier, vol. 61(C).
    16. John Fernald, 2018. "Is Slow Productivity and Output Growth in Advanced Economies the New Normal?," International Productivity Monitor, Centre for the Study of Living Standards, vol. 35, pages 138-148, Fall.
    17. John G. Fernald, 2016. "Reassessing Longer-Run U.S. Growth: How Low?," Working Paper Series 2016-18, Federal Reserve Bank of San Francisco.
    18. Mr. Nicola Pierri & Francesco Manaresi, 2019. "Credit Supply and Productivity Growth," IMF Working Papers 2019/107, International Monetary Fund.
    19. Elstner, Steffen & Feld, Lars P. & Schmidt, Christoph M., 2018. "The German productivity paradox: Facts and explanations," Ruhr Economic Papers 767, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.

    More about this item

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:23543. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.