MNI 5 Things: SF Fed's Daly on Raising Potential GDP Growth

By Jean Yung

     WASHINGTON (MNI) - The following are the key points from Federal Reserve

Bank of San Francisco Executive Vice President and Director of Research Mary

Daly in her speech Thursday at the Land Economics Society in Phoenix, Ariz.:

     - She focuses on labor market improvement through better education as a way

to lift longer run GDP growth, currently envisioned by economists to be just 2%

for the foreseeable future. "The United States has considerable room to run in

actively engaging working age people in the labor market. Investing on this

front is a lever we can pull that changes the fundamentals of economic growth

and gives us an opportunity to raise the speed limit." 

     - Labor force growth is expected to remain stuck at 0.5% for the next

decade as baby boomers retire and the fertility rate slows. That means that

absent a surge in productivity, it would restrain the economy's speed limit

going forward.  

     - Unique among developed nations, U.S. labor force participation rate has

declined. Daly mentions several theories: wealthy families choosing only to have

one wage earner, the hollowing out of middle skill jobs due to automation, and a

lack of appropriate skills training.

     - By 2020, more jobs will require a college degree than a high school

diploma, but fewer young Americans have college degrees compared to other

countries. "Working to equalize educational attainment across students of

different races and ethnicities" could be a starting place for getting more

young people into college. 

     - As executive vice president of the San Francisco Fed, Daly has attended a

number of FOMC meetings alongside President John Williams and could be appointed

interim president of the bank if Williams becomes president of the New York Fed.

She is a labor economist by training.

--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com

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