Must-Read: James Stock and Mark Watson: Why Has GDP Growth Been So Slow to Recover?

Must-Read: Stock and Watson look at growth rates and gaps between predicted and actual contributions to growth. I still think that my four-components graph conveys essentially the message more simply:

Stock: Half the GDP recovery slowdown is demographic trend-driven. But any argument that work though weak private investment and weak private consumption does not track. The explanations are, instead. The federal sequester. Weak state and local spending. Weak foreign demand.

I agree with the “demographic/trends” part, and the government purchases part. But rather than weak foreign demand I see the failure of residential construction to bounce back to normal, somewhat offset by strong exports.

No. I haven’t yet figured out why their more complex cut at the data has this different emphasis:

James Stock and Mark Watson: Why Has GDP Growth Been So Slow to Recover?: