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Goldman Sachs Research expects the US economy to have a potential growth rate of more than 2% over the next few years, with some additional acceleration in the coming decade. Our economists anticipate artificial intelligence (AI) will increase labor productivity growth while workforce expansion slows.
The economy’s potential growth rate can be broken down into two key components: the contribution from growth in labor productivity (or real output per hour worked) and the contribution from changes in the size of the workforce, Goldman Sachs Research economist Manuel Abecasis writes in the team’s report.
What is the forecast for the US economy’s potential growth rate?
Goldman Sachs Research expects productivity growth across the US economy to increase 1.7% through 2029 and 1.9% in the early 2030s. Together with our economists’ forecasts for labor force growth, these estimates suggest that potential GDP growth will average about 2.1% in 2025-2029 before accelerating to 2.3% in the early 2030s as AI boosts growth further.
That’s a slightly lower potential GDP growth rate than the US is estimated to have had in recent years because elevated immigration boosted the size of the labor force, but it is well above the pre-pandemic pace. Since 2019, economywide labor productivity rose about 1.6% per year, well above its pre-pandemic average of 1.2%. At the same time, elevated immigration in 2022-2024 boosted annual labor-force growth to about 0.8% on average since 2019 (versus 0.6% before the pandemic). As a result, Goldman Sachs Research estimates that potential GDP growth rose from about 1.8% before the pandemic to around 2.4% in the years since.
What is the outlook for US economy’s productivity?
Our economists estimate that worker productivity has increased more quickly this decade: Labor productivity (outside the farm sector) grew 2% on average in the last five years, compared to about 1.5% pre-pandemic, according to Goldman Sachs Research. Growth in total factor productivity (economists think of TFP as technology innovation’s contribution to output) accounted for most of the acceleration. Nonfinancial corporate productivity growth was even stronger, at a 2.5% annualized rate since the fourth quarter of 2019 (after adjusting for some distortions).
“The bulk of the post-pandemic productivity outperformance has been driven by higher services productivity,” Abecasis writes.
