The US economy is benefiting from the higher-pressure effect

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The evidence for the effects of so-called reverse hysteresis are mounting

The writer is founder and president of MacroPolicy Perspectives and Clinical Associate Professor of Finance at University of Texas at Austin The US economy’s outperformance has continued so far in 2024 despite the non-trivial uncertainties associated with a looming presidential election. Part of the American story has been a better productivity performance than its peers.

Another study by St Louis Fed economists examined company earnings reports and found that the tight post-pandemic labour market spurred significant increases in investment and productivity gains. The study concluded that since 2021, the tight labour market had been responsible for an additional $55bn in investment, worth about 6 per cent of total fixed investment between 2021 and 2023.

 

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