Why Potential GDP Has Been Cut in Half Since the 1950’s?

The main reason is a lower productivity than previous business cycles, due to:

– lower population growth

– the service sector is growing faster than the industry sector

– lower quality jobs in the service sector have a lower productivity than in the industrial sector associated with higher quality jobs

– low interest rates and investor demand for leveraged loans have created zombie firms

– a poor education system leads to more open jobs than unemployed workers, because workers are not skilled enough to fill the jobs

and more….

GDP vs Potential GDP
Job Openings vs Unemployment Level