Anyone who sees the pace of U.S. economic growth as subpar may be looking back too far in making that judgment, according to James W. Paulsen, chief investment strategist at Wells Capital Management in Minneapolis.
“Comparisons of recoveries since 1985 to those of earlier vintages seem inappropriate” because the country’s labor force no longer expands as much as it did historically, Paulsen wrote this week in a report.
The CHART OF THE DAY illustrates this by tracking the year- to-year percentage changes in the number of civilians working or job hunting, according to data compiled by the Labor Department. Recession periods are shown in red.
During the past quarter century, the fastest growth rate was 3.2 percent for the 12 months ended in April 2000. The pace was exceeded 11 times between 1950 and 1985, as the chart shows.
“The inherent economic growth which used to be forthcoming from a rapid expansion in the labor force has significantly diminished,” Paulsen wrote. After accounting for this, the current economic rebound looks similar to other post-1985 recoveries, in his view.
Since the economy began expanding two years ago, the labor force has yet to achieve 1 percent growth. Even so, the rate of change has risen as much as 5.3 percentage points from its post- recession low. The increase surpassed those for the first five years after the economy’s 1990-1991 and 2001 slumps.
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