Roll Call: Latest News on Capitol Hill, Congress, Politics and Elections
November 1, 2014

Cam Economic Growth be Sustained?

Robert Litan, writing in The Wall Street Journal, argues that although the Fed must decide how much slack is left in the labor market, “that’s only the short-term challenge confronting the nation’s monetary authorities.”

The challenge is “figuring out how fast the economy can grow on a sustained basis over the long-run. The higher that number, the more relaxed the Fed can be without igniting accelerating inflation.”

Litan points to a new study released by the Federal Reserve Band of Cleveland that tracks where new jobs have been coming from and shows a “declining share from the creation of new companies.”

“While it’s good news that more jobs are being created, the fact that they are increasingly coming from more established firms supports the finding of an earlier study Ian and I published showing that the firm structure of the U.S. economy is aging.”

“The data on where jobs are coming are thus consistent with official government forecasters’ current moderate pessimism about the long-run prospects for U.S. economic growth in the future.”

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