Capital Markets Winter 2021

I

Mind the Output Gap Road to Recovery

• The U.S. economy is operating substantially below its potential, implying that significant room is left in the expansion in our view

I

Large Output Gap Implies A Lot of Growth Left

II

Recession U.S. Output Gap

3%

Less Sustainable Growth Remaining

2%

III

1%

0%

-1%

IV

-2%

-3%

-4%

More Sustainable Growth Remaining

-5%

GDP / Potential GDP -1

V

-6%

-7%

1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

VI

Source: Alger using GDP consensus forecast as of 1/1/21 and Congressional Budget Office potential GDP estimates as of July 2020. The output gap indicates the difference between the actual output of an economy and the maximum potential output (the economy’s maximum sustainable output with underlying inputs including the natural rate of unemployment, various measures of the labor supply, capital services, and productivity) of an economy .

3

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