Should-Read: Richard Peach and Charles Steindel: Low Productivity Growth: The Capital Formation Link

Should-Read: Richard Peach and Charles Steindel: Low Productivity Growth: The Capital Formation Link: “Capital intensity… reflect[s] the effect of current and past physical investment on the growth of labor productivity… http://libertystreeteconomics.newyorkfed.org/2017/06/low-productivity-growth-the-capital-formation-link.html

…The 0.5 percent growth contribution for “capital intensity” estimated for the period from 2007 through 2016 is less than half that seen in the periods from 1995-2000 and 2000-2007. The slowdown can be largely attributed to the sluggishness in net investment…. There are surely many factors that have contributed to the pronounced slowdown of growth of labor productivity. Given the complex set of forces that affect productivity, projecting its medium-term trend is problematic. Still, data suggest capital formation has played a role and the odds of a rebound in productivity are reduced if the weakness in investment spending continues.