Market Overview Analysis by Claudia Sahm covering: . Read Claudia Sahm's latest article on Investing.com
It is important that we don’t just look at a GDP number and say, “Oh, it’s almost 3%,” and move on. We need to stop and ask, “Why is growth so good?”
The US stands out globally. Joseph Politano’s excellent piece on productivity shows that the gains in the US are unlike any of our peer countries. After decades of a falling startup rate, since the pandemic, the US economy is slowly becoming more dynamic with more younger firms. An important question is why the increase in new businesses happened and whether it can be extended. My piece mentions some of the possible causes:
Lowering entry costs and promoting competition through better regulation could similarly support productivity. Interest rates can raise the costs of starting and growing a business, so the Fed must be careful not to choke innovation with higher interest rates than necessary.Another likely source of the recent pickup in productivity is the strong labor market during the recovery.
The US offered generous income support during the pandemic but did not prioritize keeping workers with their employers in the recession, such as in countries like Germany.
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