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US economy: the past decade, the future decade


Economy & Rates

06.11.2019

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Bruno Cavalier
Chief Economist at ODDO BHF

Ten years after the end of the Great Recession, there remains some scars of this shock on the labour market. Over the past decade employment has increased more rapidly than the labour force (post-crisis catch-up) and productivity gains have been mediocre. Barring a major accident, these trends could be corrected over the next decade. BLS employment trend projections suggest a sectoral rebalancing: a slowdown in productivity in the technology and oil sectors from a high level, and a rebound in the industry. Personal services would remain the main contributors to the increase in employment.

The week’s focus.

It is a risky exercise to make ten-year forecasts, but setting aside the vagaries of the business cycle, we can draw some interesting insights. This is the task the Bureau of Labor Statistics sets itself every two years. Its latest report for the 2018-2028 decade has just been published1. We have summarised the quantified details in the table below. Here are the main conclusions to be drawn from it.

Slowdown in employment growth.
After collapsing between 2008 and 2010, employment has since rebounded sharply, rising by more than 1.5% per annum over the last five years. This is a catch-up effect. If we take the pre-crisis peak as the reference, the trend is more modest. The BLS predicts that employment will trend in line with its natural rate (the working population) of 0.5% per annum.

Acceleration in productivity.
Barring a radical revision of growth potential (this is not the assumption of the report), higher productivity gains are just the counterpart for the deceleration of employment growth. It is logical that businesses make few productivity efforts when there is an abundant supply of labour and vice-versa. According to the BLS, the rebound would be significant in industry.

Deceleration of dynamic sectors (tech, oil).
IT, notably new technologies, and the oil sector, with the shale oil revolution, have largely contributed to the post-crisis economic recovery. The BLS predicts that these sectors will remain dynamic, but at a less sustained pace. Their contribution to the increase in activity is forecast to rise from 19% over the past decade to 11% over the next. In terms of jobs, their contribution was fairly modest at 9% overall and would likely remain almost unchanged. 

More jobs in personal services sector.
In advanced and ageing societies, the demand for education, health and other services (catering, leisure) is high. It will remain so. These sectors account for about one-fifth of total employment, but their contribution to employment growth since 2008 has been 58%. BLS forecasts that this share will rise to 63% in the next decade.

1 See BLS (2019), Projections overview and highlights, 2018-2028

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