Janet Yellen cites three factors for why the Fed's growth estimates may be too high: demographics, education and productivity.
earlier this month. An expansion of 1.9% is lackluster compared to growth rates of previous decades when the economy consistently expanded by at least 3%.
But Yellen thinks the Fed may be overestimating the strength of the U.S. economy with its forecast. "It's actually an optimistic projection," she said, citing three factors: demographics, education and productivity. On demographics, Yellen noted that labor-force growth is approximately a meager 0.5% as population growth has slowed down in recent years. She added that, in the 1980s, labor-force growth got a boost from "an influx of women" joining the force.
"Another reason the 1.9% number is not very high has to do with education. Improvements in average educational attainment of the labor force also boost economic growth," said Yellen, who was Fed chair between 2014 and 2018. "That's continuing to rise, but it's not rising … as rapidly as it used to." Yellen also said productivity has remained stubbornly low for years. U.S. labor-force productivity has grown by more than 2% in just four quarters since the start of 2015,
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