Exhibit 12: US Labor Productivity Growth Exhibit 13: Correlation of 5-Year US Productivity Periods of slow productivity growth have been followed by Growth Rates With Following 5 Years’ periods of stronger productivity gains. Productivity Growth Rates Recent productivity trends tell us little about the future. Average Annual Growth Rate (%) Correlation 40 0.25 3.5 3.4 3 3.2 32 soa 3.0 aa as | ona 20 2.0 15 4 " : us 13 Dds 0.08 0.05 - 0.5 - 0.0 - 0.00 1889-1917 1917-1927 1927-1940 1940-1948 1948-1973 1973-1995 1995-2004 2004-2015 Since 1957 Since 1970 Data through 2015. Data through 03 2016. Source: Investment Strategy Group, Lee Branstetter and Daniel Sichel, “Seven Reasons to Be Source: Investment Strategy Group, Haver Analytics, Olivier Blanchard, “Three Remarks About Optimistic About Productivity,” forthcoming Peterson Institute for International Economics the US Treasury Yield Curve,” Peterson Institute for International Economics, June 22, 2016. Policy Brief. We have examined labor productivity growth productivity is also mismeasured, thereby rates and, as shown in Exhibit 13, find even invalidating the whole theory of secular stagnation lower correlations. and the decline of the US economy. There are two issues to consider. First, if the reported productivity growth rates are accurate, Mismeasurement of GDP Statistics then the exceptionally low rates of the last 10 years In addition to the productivity debate, there is account for part of the slow pace of this recovery. a debate as to whether we are measuring GDP However, the current low productivity growth rates correctly in the first place. The key argument being do not portend low growth rates going forward. made is that while we correctly measure the value Just as Hansen was proven wrong on his secular of nominal GDP based on the value of goods and stagnation theory and Krugman was proven wrong _ services, we mismeasure the value of real GDP on his diminished expectations for th