“Entitlement programs and regulation are gradually crowding out capital investment, productivity, and follow on standards of living.”
Alan Greenspan
What’s the Economy Telling us about Election 2016?
This week we learned U.S. productivity rose annualized 3.1% (forecast was 2.1%) after revised 0.2% drop.
The productivity data represents a much needed break from the longest consecutive string of declines since 1979. As the election gets nearer the implications of a fundamental shift in business operating conditions are massive.
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U.S. Non-Farm Productivity Year over Year
An ugly picture, an economic expansion well below average. Over the last five years, annual productivity gains averaged 0.6%, the weakest since 1978-1982. Disappointing U.S. productivity growth has been embarrassing FOMC policy makers since the recovery began in 2009.
Fed’s Balance Sheet Shooting Blanks
Their balance sheet has exploded since 2009 with mixed results. Productivity gains are a key determinant for an economy’s ability to grow. Total factor productivity, a wide measure of the efficiency with which an economy uses its inputs, averaged just 0.29% in the past 12 quarters, according to the San Francisco Fed.
“Business investment has been surprisingly weak”
Fed Chair Janet Yellen, September 2016
Election 2016, Set Her Free, U.S. Economy is Caged
It’s clear to us, the election and regulatory uncertainty, coupled with the entitlement debt crowd-out has U.S. businesses in a straight jacket. They will NOT invest, created meaningful job growth. This should all change late next year, give American business owners visibility and we’ll all be surprised at the upside potential.
The U.S. economy is a caged gorilla in the chains or regulatory, tax burden, and entitlement crowd out, set her free.
Don’t miss our next trade idea. Get on the Bear Traps Report Today, click hereCrowdout US Productivity Growth*
2010-16: 0.3%
Bush: 2.2%
Clinton: 2.3%
Reagan: 2.2%
*annual % change in GDP per hrs worked
US Gov Entitlement Transfers % of Total Budget Outlays
2016: 74%
2000 57%
1990 49%
1980 44%
1970 38%
1960 28%
1950 26%
1940 12%
CBO data
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