Productivity growth is in a funk. We delve into the reasons, lay out three scenarios and assess their likely impact on monetary policy and asset prices.
Financial markets tend to fixate on the latest economic data release or the next central bank move. Our new publication takes readers away from the chatter, takes a step back, and details the implications of the global productivity slowdown on monetary policy and asset prices.
Labor productivity has slowed sharply around the world. Why does this matter? Productivity is the key driver of potential growth rates and living standards in the long term. The tables below summarize our findings, which are outlined at length in Productivity Slowdown Puzzle.
|Structural Slowdown||Cyclical Rebound||Measurement Error|
|Description||Productivity growth remains sluggish; economists downgrade their estimates of potential economic growth.||Productivity growth returns to historical averages. Companies boost capex as uncertainty over policy and growth outlook ease.||Official statistics understate the benefits of innovation — and underestimate productivity|
|Short-term rates||Long-term rates||Breakeven inflation||Credit spreads||Equities|
Source: BlackRock Investment Institute, January 2016. For illustrative purposes only.