The United States has entered a permanent slow-growth mode of about 1.4% per year, according to Jeremy Grantham, GMO LLC's chief investment strategist.
“The U.S. GDP growth rate that we have become accustomed to for over a hundred years — in excess of 3% a year — is not just hiding behind temporary setbacks; it is gone forever,” he wrote in a quarterly update.
“When the debt is repaid and housing is normal and Europe has settled down, most businesspeople seem to expect a recovery back to America's old 3.4% [real] growth trend, or at least something close. They should not hold their breath,” Mr. Grantham wrote.
Driving the permanently lower growth rates are several long-term trends, including population growth of less than 0.5%, which is down from more than 1.5% since the 1970s, he wrote.
Mr. Grantham also pointed to low and declining growth in service productivity, as well as rising resource costs.
In addition, he cited lackluster growth in hours worked annually, which he estimates will rise only 0.2% a year.
“Attitudes to change are sticky,” Mr. Grantham wrote.
“We cling to the idea of the good-old days with enthusiasm,” he wrote. “When offered unpleasant ideas, or even unpleasant facts, we jump around looking for more-palatable alternatives.”
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