US: Will growth fall from 3% to 2%, or from 3% to 0%? - Natixis

The return to full employment in the United States is bound to reduce growth, and in the best case bring it back to the level of potential growth, according to Patrick Artus, Research Analyst at Natixis.

Key Quotes

“This is the optimistic scenario where the US economy slows down moderately, from growth of around 3% to around 2% per year, because of companies’ recruitment difficulties.”

“But each time in the past when the United States has returned to full employment, there has been a recession (which we call growth falling from 3% to 0%) and not a simple slowdown in growth (from 3% to 2%).”

“Can we now see a mechanism that could trigger the scenario of growth falling from 3% to 0% in the United States?”

“We frankly cannot see it:

• Households have deleveraged, banks are strongly capitalised, companies have high profitability and low debt;
• Inflation and interest rates are unlikely to rise markedly;
• Global trade is growing rapidly and fiscal policy is becoming expansionary;
• There is no serious asset price bubble.”