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Monday, November 11, 2013

US Capacity Utilisation is Historically low

According to this graph (open in a new window to view it properly), the US stimulus restored capacity utilisation from the worst plunge in the data shown, but nevertheless it is still relatively low by recent historical standards, which indicates that the US is far from full employment.

Just look at where the rate was back in last booms of the golden age of capitalism (1946–1973): close to 90%. Even the Clinton boom years had a higher rate than now.

The lesson is not that stimulus does not work (look at the V shaped recovery), but that more is necessary. Much more.


3 comments:

  1. This might interest you:

    http://angrybearblog.com/2013/11/potential-gdp-is-as-labor-share-does-economic-mystery-revealed.html

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  2. It’s possible the chart does not prove more stimulus is needed (though actually I think more stimulus is needed). Reason is thus.

    Interest rates have drifted downwards since the 1970s, which means that it might make sense for firms to have more plant sitting idle than in the 1970s. And/or if the total amount of investment per worker has declined for technological reasons, that would justify more idle plant.

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