U.S. Economic Outlook: Seven years of steady but tepid growth

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U.S. Economic Outlook: Seven years of steady but tepid growth

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The U.S labor market is tight and is expected to return to full employment in 2017. However, productivity has risen less than 1% for six consecutive years. Sluggish productivity has implications for wage growth, which has been low by historical standards during this economic recovery. Wage growth seems to be already picking up, though, as the economy continues to advance. Average hourly earnings for private-sector workers rose 2.9% in December 2016 from a year earlier. That was the strongest growth of the current expansion. Inflation has been low for the past four years. However, as the expansion advances, unemployment recedes and wage growth begins to accelerate, a four-year stretch of historically low inflation could be coming to an end. A cautious and highly accommodative monetary policy has supported the current economic expansion, but tightening is already under way. The Federal Reserve has increased interest rates by 25 basis points three times in this expansion: in December of 2015, December of 2016, and March 2017.


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