US Outlook Mar 2016

A look into supply and demand

Paulo Gustavo Grahl, CFA

March 7, 2016

Outline

Supply

Labor supply: working population slows down

Labor supply: reforms to increase participation needed

Labor supply: room for unemployment to fall further?

Productivity

Overall productivity

Business output

Breakdown of business output

Breakdown of business output:

One key concern is the stagnation of capital intensity – increasing capital deepening comes hand in hand with labor productivity. Of course this can reflect a shift towards less capital intensive industries (away from oil, mining, telecom, chemicals, railways, etc.), but nevertheless is a worrying sign. Has marginal return to capital reached zero?

Potential GDP