I think there are 5 reasons: slower growth of capital per worker, slower TFP, capital misallocation, the absence of full employment, and dysfunctional government (labor quality has been pretty constant, so it isn’t much implicated in the slowdown).
Employment growth at US companies slowed in April to the weakest gain in three years, according to this morning’s update from ADP. The private sector added only 156,000 positions to payrolls last month in seasonally adjusted terms—well below expectations for a gain of nearly 200,000. Today’s data raises new questions about expectations for a second-quarter rebound in economic activity following the weak Q1 GDP report. The numbers du jour also revive the focus on a question I asked last week: Will Job Growth Kill The Bear-Market Signal For Stocks?
Markets continue to recover from the growth scare that set in beginning around the end of last year. Oil prices were plunging, creditors feared a wave of defaults, commodity prices were plunging, China was thought to be on the verge of a huge slowdown, and central banks appeared powerless to avoid another recession. What a difference a few months make. "Avoiding a recession is all it takes" has been a recurring theme of this blog for more than three years, and it's still relevant. Here are some more charts which suggest that instead of tipping over into a recession, the economy is more likely picking up a bit. Growth is still slow, but slow growth is a lot better than a recession, especially when cash yields almost nothing.