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FT: Low Worker Productivity Hinders Trump's Economic Growth

Image: FT: Low Worker Productivity Hinders Trump's Economic Growth

By    |   Wednesday, 17 May 2017 11:13 AM

A sluggish labor market and low worker productivity are among the factors limiting President Donald Trump’s plans for robust economic growth.

"U.S. labor productivity — a driver of the economy’s fortunes — is forecast to expand 1 percent this year, an improvement on the 0.5 percent recorded for 2016 but far shy of the 2.9 percent growth seen from 1999 to 2006," the Financial Times reported, citing Conference Board projections shared with the newspaper.

Labor productivity is commonly defined as a measure of economic growth within a country. It measures the amount of goods and services produced by one hour of labor; specifically, labor productivity measures the amount of real gross domestic product (GDP) produced by an hour of labor. Growth in labor productivity depends on three main factors: investment and saving in physical capital, new technology, and human capital.

If the sluggish performance continues, "it will make it harder for the U.S. to meet the stellar gross domestic product growth targets set by the Trump administration, which is counting on lower taxes and lighter regulation to spur growth of at least 3 percent," the Times reported.

“Even an optimistic productivity scenario would not get close to the Trump administration’s target of 3 percent GDP growth,” Bart van Ark, chief economist at the Conference Board, a think-tank, told the FT.

However, there are much more optimistic forecasts for any skeptical investors to consider.

The U.S. economy is forecast to expand at a 4.1 percent annualized pace in the second quarter following the release of April figures on housing starts and industrial output, the Atlanta Federal Reserve's GDP Now forecast model showed on Tuesday.

Domestic factory production increased 1.0 percent last month for its biggest monthly gain in over three years, but housing starts unexpectedly fell 2.6 percent, government data showed on Tuesday.

The latest second-quarter gross domestic product estimate was faster than the 3.6 percent reading calculated on May 12, the Atlanta Fed said on its website.

Elsewhere, veteran financial guru and former Ronald Reagan adviser Larry Kudlow said that the Trump White House estimates of economic growth of 3 percent to 3.5 percent are actually “too conservative” and the economy is poised to expand much faster than that.

“With Reagan, we put up 4% growth rates coming out of a deep recession," Kudlow, who was a senior economist in the Reagan White House, told CNBC.

"The Trump people, who are cutting tax rates, particularly on businesses but every place else, rolling back regulations, rolling back Obamacare are penciling in a 3% to 3.5% growth of real GDP” for the first year, said Kudlow, a radio talk-show host and CNBC senior contributor.

(Newsmax wire services contributed to this report).

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A sluggish labor market and low worker productivity are among the factors limiting President Donald Trump's plans for robust economic growth.
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Wednesday, 17 May 2017 11:13 AM
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