Full text of Economic Synopses : U.S. Economic Growth, Relatively Speaking, 2005, No. 16

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Economic SYNOPSES
short essays and reports on the economic issues of the day
2005 ■ Number 16

U.S. Economic Growth, Relatively Speaking
Cletus C. Coughlin
ublic discussion of many issues—current account
columns (in bold) show G-7 productivity growth for 1995deficits, federal budget deficits, Social Security reform,
2002, 2003, and 2004. Productivity, as measured by output
high oil prices, a possible housing price bubble, and
per worker for the entire economy, has increased at a faster
Chinese exchange rate policy, to name a few of the more promirate in the United States than in any other G-7 country over
nent ones—has obscured the point that, relatively speaking,
the past ten years. For the period 1995-2002, U.S. productivity
the U.S. economy has expanded at a healthy pace. The table
increased at an average annual rate of 1.9 percent. The second
illustrates this point by juxtaposing the performance of the
leading country in terms of productivity growth was Canada,
U.S. economy with that of other high-income countries.
with an increase of 1.5 percent. For 2003, U.S. productivity
In the table, the values on the left-hand side of the columns
growth was 2.1 percent. The United Kingdom, with a rate of
show GDP growth for the G-7 countries for 1995-2002, 2003,
1.8 percent, was second. A similar ranking holds for 2004, with
and 2004, as well as the International Monetary Fund’s projecU.S. growth at 3.3 percent and British growth at 2.5 percent.
tions for 2005.1 Over the past ten years, U.S. economic growth
Regardless of how one assesses the economic challenges
facing the U.S. economy, U.S. growth has been noteworthy.
has compared favorably with that of the other G-7 countries.
Moreover, such growth generates resources to confront these
Using the simple average of annual growth rates for 1995-2002,
challenges. ■
one sees that the English-speaking G-7 members converge at
the top. The United States, with a growth rate of 3.2 percent,
1
A graphical representation of these data, as well as the productivity data used
trails only Canada, which grew at a rate of 3.5 percent. More
later, can be found in International Economic Trends Supplement. In the February 2005
recently, U.S. economic growth has exceeded the growth of
issue, see pp. 2-3 for the economic growth data and pp. 12-13 for the productivity
the other six countries. For 2003, the U.S. economy grew at a
data.
3 percent rate. The United Kingdom and Canada grew at a
pace roughly 1 percentage point slower, and
Japan grew at a pace roughly half the U.S. rate.
G-7 Output and Productivity (annual percent change)
Meanwhile, the three continental European
countries generated negligible growth. G-7
Output growth / Output per worker*
growth accelerated in 2004. The U.S. economy
grew at a 4.4 percent rate, more than 1 per1995-2002
2003
2004
2005 (projected)
centage point faster than the growth in the
United States
3.2 / 1.9
3.0 / 2.1
4.4 / 3.3
3.6
second-fastest country, the United Kingdom.
Canada
3.5 / 1.5
2.0 / –0.3
2.0 / 1.1
2.8
Despite their accelerating growth, the three
France
2.4 / 0.5
0.9 / 1.4
2.1 / 2.0
2.0
continental European countries continued to
Germany
1.5 / 1.0
–0.1 / 0.8
1.0 / 0.7
0.8
grow relatively slowly.
Italy
1.8
/
1.0
0.4
/
0.0
1.1
/
0.3
1.2
Projections for 2005 suggest that the United
Japan
1.1
/
1.3
1.4
/
1.6
2.6
/
2.4
0.8
States is likely to continue to lead G-7 countries
United
Kingdom
2.9
/
1.3
2.2
/
1.8
3.1
/
2.5
2.6
in economic growth. Despite some slowing,
U.S. economic growth is projected to be 3.6
SOURCE: 1995-2004 GDP data: for U.S., Dept. of Commerce, BEA; for all other countries, OECD.
percent, which is 0.8 percentage points greater
2005 data for all G-7 countries: IMF World Economic Outlook, April 2005. Employment data:
than the projection for the next-best performer,
U.S., Dept. of Labor, BLS; Japan, OECD; Canada, Statistics Canada; France, Institut National de
la Statistique et des Études Économiques; Germany, Bundesanstalt fur Arbeit; Italy, Istituto
Canada.
Nazionale di Statistica; U.K., Central Statistical Office. Non-U.S. GDP data, OECD.
Productivity growth is the key reason for
*Calculated as GDP/civilian employment.
the relatively strong U.S. performance. In the
table, the values on the right-hand side of the

P

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