OECD Sets Low Bar For U.S. Growth

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Tuesday, 03 September 2013 04:35

According to the New York Times, the OECD sees both Japan and the United States as growing at "encouraging" rates this year. The article reports the OECD expects the U.S. economy to grow at a 2.5 percent rate in the third quarter and 2.7 percent in the fourth quarter. This would bring the growth rate for the full year to 2.2 percent. That is roughly equal to the economy's potential growth rate, which is usually put between 2.2-2.4 percent. That would mean the country is making up no progress in reducing an output gap that the Congressional Budget Office puts at 6.0 percent of GDP.

By contrast, Japan is projected to grow by 2.9 percent this year. This is considerably faster than Japan's potential growth rate since it has a shrinking population and labor force. Japan's 3.8 percent unemployment rate is already below the 4.3 percent figure that the OECD puts at Japan's structural rate of unemployment.