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America’s New Normal Will Look Pretty Slow, Fed Economist Says

  • San Francisco Fed’s Fernald sees productivity key uncertainty
  • Tepid growth will mean weaker wages and tax revenue gains
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Photographer: Luke Sharrett/Bloomberg

The new normal for long-run U.S. economic growth could be 1.5 percent to 1.75 percent a year, a major slowdown from the 1990s and early 2000s as an aging population, more gradual gains in education and weak productivity growth take their toll.

In a new paper, Federal Reserve Bank of San Francisco economist John Fernald takes a stab at projecting the future normal rate of growth given long-term trends in the economy. The historically slow pace he comes up with would have major implications for America’s future prosperity.