Atlanta Federal Reserve Bank president Dennis Lockhart argued Monday that the U.S. might be losing its “economic mojo.”
“There is some evidence to the affirmative,” he said at a New York conference of business leaders, faculty and policy makers.
Lockhart, who did not have a vote when the Fed decided last week to maintain its stimulus program at current levels, said the nation’s current economic recovery has fallen short of past comebacks. One reason he suggested is that the U.S. isn’t being creative enough in finding ways to grow.
He described a “mojo triad” that takes into account traditional indicators of employment, productivity and business start-ups.
In a growing economy, jobs are created and destroyed as the businesses behind those jobs are created and destroyed. Besides high levels of unemployment, today’s workforce has seen about four million less than the historical precedence of about 18 million jobs created and destroyed quarterly, Lockhart said.
Productivity has also lagged, and Lockhard predicted this trend would reverse “as demand kicks into higher gear and as businesses expand production somewhat faster than they expand their payrolls.”
The healthy “entrepreneurial ecosystem” requires new companies that grow rapidly — or fail. Lockhart called them “a key factor in the cycle of job reallocation in the economy.” But the “general atmosphere of uncertainty in the wake of the financial crisis and recession” hasn’t fostered the risk-taking entrepreneurs need, he said.
He offered tactics that policy makers, including the central bank, can take to boost the “mojo triad.” Regulators can remove barriers to entrepreneurship and invest public funds in human capital, while those who control monetary policy can “deliver appropriately favorable interest rate conditions” for economic growth.
“There are reasons to believe that some of the decline is cyclical in nature and will reverse itself over time,” Lockhart said. “Anything more will call for creative leadership.”
