Fed Vice Chair Fischer says weak productivity major problem

WASHINGTON — Federal Reserve Vice Chairman Stanley Fischer said Monday that the rate of productivity growth has fallen dramatically in the United States and other countries over the last 20 years, and economists are unsure what to do about it.

Fischer said “there are few issues more important for the future of our economy” than boosting productivity, the amount of output per hour of work.

Productivity grew at a solid 3 percent from 1952 to 1973, then slowed to 2.1 percent from 1974 to 2007, he said. From 2008 to 2015, productivity growth in the United States fell to an average rate of just 1.2 percent.

Fischer said this retreat will likely have “severe consequences” on the nation. But economists are unsure of why the slowdown has occurred or what will happen to productivity in the future.

His comments were in a speech to the National Association for Business Economics.

In prepared remarks, Fischer did not comment on the current state of the economy or what the Fed might do next with interest rates.

The Fed in December raised its key rate for the first time in nearly a decade, boosting it by a quarter point to a range of 0.25 percent to 0.5 percent. Policymakers did not raise rates at its January meeting, and officials are expected to leave rates unchanged when they meet again on March 15-16.

Private economists have reduced their expectations for rate hikes this year from four down to two. They believe the central bank will be more cautious about raising rates in the wake of financial market turbulence and spreading global weakness at the beginning of the year.