[lbo-talk] Is the US economy at full potential output?

Eugene Coyle e.coyle at me.com
Wed Nov 29 14:03:04 PST 2017

The Congressional Budget Office, as reported in the WSJ, says the US is producing at the maximum sustainable level of output.

> WASHINGTON—The U.S. economy is running at its full potential for the first time in a decade, a new milestone for an expansion now in its ninth year.
> Total economic output in the third quarter was slightly above the maximum sustainable level of output as estimated by the nonpartisan Congressional Budget Office.

The full WSJ story is here: https://www.wsj.com/articles/u-s-gdp-growth-revised-up-to-3-3-rate-in-third-quarter-1511962566.

This, IMO, is ridiculous. I see slack in the US economy.

Employers have been saying for months that “we can’t find workers.” But employers often make that assertion. I can remember hearing it since 1950, when machinists and especially tool and die makers were the shortage. Labor force participation is down, car manufacturers spend a lot on discounts/ cash back, dentists are scrambling for cavities.

Economists are quoted in the WSJ agreeing with the report, but one added

> Ms. Bovino said the recent closure of the output gap is “a bit misleading.”
> ”Yes, we did reach the U.S. economy’s potential growth rate, but in part for the wrong reason. We’ve moved the goal post,” she said.

Ms Beth Ann. Bovino is chief U.S. economist at S&P Global Ratings.


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