Looking back: After a year of fruitless economic worries, the expansion still has momentum.
Tensions with China are finally easing, and the summer’s heated rhetoric had little impact on trade flows.The Treasury yield curve inverted steeply before flattening, leaving little discernible impact on the real economy.Headwinds slowed the manufacturing sector but barely affected the overall expansion.
The new normal: The top of this business cycle has been confusing. Past expansions saw much faster growth, but the aging workforce has changed the rules of economic prosperity.
The last recession masked America’s demographic transformation—for a full decade, slack in the labor market hid the impact of baby-boomer retirements.But now that the US is back to full employment, the aging workforce may only be able to sustain a 2 percent pace of GDP growth.Unemployment is at a record low and productivity at a record high.Slowing growth isn’t a sign of weakness: What matters more than GDP is how close the economy is to its full potential.