News
GDP Growth · Labor Force · Productivity · US Economy
The US economy faces permanently slower growth, as projected by the Obama budget and BLS analysis, due to a significant slowdown in labor force expansion, with annual GDP growth expected to decrease to 2.6% from 2012 to 2022, down from historical rates above 3%.
The Bureau of Labor Statistics (BLS) projects the labor force will grow only 0.5% annually from 2012 to 2022, a decrease from 0.7% in the prior decade, primarily due to the aging baby-boom generation and declining labor force participation rates for both men and women. Historically, US GDP growth averaged 3.3% over 50 years, with 1.6% from labor force growth and 1.7% from productivity.
To counteract the projected slowdown, productivity growth must increase significantly. The McKinsey Global Institute suggests that even with policy changes like a higher retirement age and smarter immigration boosting labor force growth to 1%, productivity would still need to reach 2.3% long-term to maintain the historic 3.3% GDP growth rate.
Policy options include Social Security reform, wage subsidies, and increased immigration.
The report found that industries that adopted race-based hiring policies in the past decade saw productivity fall, bolstering Trump’s opposition.
