US economy remains on track toward full capacity, despite global headwinds

The US economy remains on track toward full capacity, despite global headwinds. In the first three quarters of this year, trade sliced 0.6% off of growth, mining investment another 0.6%, and inventories 0.2%. That leaves solid growth of 3.3% for the rest of the economy. For example, while investment in mining structures has collapsed, other structures investment has been accelerating. Looking ahead, the drag from mining investment is expected to continue to abate and for the trade drag to drop to 0.4% next year. The economy should be able to pick up slightly as these headwinds abate. 

Not only do demographics suggest very slow growth in the labor force, but productivity data have been persistently weaker than expected. Low trend growth means that moderate GDP growth will continue to drive the unemployment rate lower. The median forecast of the FOMC has the unemployment rate dip to 0.2% early next year and then abruptly stops falling at 4.8%. This seems implausible: the official unemployment rate is expected to hit 4.5% by the end of next year and for the broad U-6 measure to return to its historic average of about 9% early in the year.