The Productivity Cost of Low-Growth Expectations

Episode 20 of The Productivity Podcast explores how the economy's long-term potential growth rate—often called r-star or the natural rate—has quietly fallen, and what that means for business investment and worker productivity. Lucas and Luna unpack a 2025 Federal Reserve study estimating that the U.S. natural rate of growth has dropped from about 3.2% in the 1990s to roughly 1.8% today. They discuss how lower expected demand discourages companies from making productivity-enhancing capital expenditures, creating a self-fulfilling cycle. The episode contrasts the post-war boom with current sluggishness, using the example of factory automation adoption rates lagging despite cheaper robotics. A concrete look at how expectations shape output. #ProductivityPodcast #Economics #NaturalRateOfGrowth #RStar #FederalReserve #PotentialGDP #CapitalExpenditure #ProductivitySlowdown #Automation #BusinessInvestment #LongTermGrowth #Expectations #EconomicGrowth #InvestmentCycle #FactoryAutomation #FexingoBusiness #BusinessPodcast #Productivity Keep every episode free: buymeacoffee.com/fexingo