BY SAMUEL RINES

The US economy has slowed, and the reasons for the sluggish growth cause heated arguments among market participants and economists alike. There are two outspoken camps: “the good ole days are coming back” and “this is normal.” The camps have little in common, except yelling at one another.

Good Ole Days

Regardless of whether or not the good ole days will return, they are a long way off. There are a number of reasons for this, but as this recent paper pointed out, demographics are destiny. Sure, Millennials could create a baby boom, but it’s doubtful. Even if they were up to the task, it would take decades for the effects to trickle through the US economy.

Everyone loves to harp on Millennials. But their predecessors had a few key demographic traits handed to them that boosted economic growth. The Boomer generation had the benefit of astounding population growth and labor force gains. As women joined the labor force in greater and greater numbers, the growth accelerated the Boomer boost. All of this made an unrepeatable economy to grow and thrive in.

Granted, sheer numbers was not enough to drive such an economic surge. As the paper notes, there was also a “labor quality” aspect to the Boomers’ economic ascension. Labor quality measures the educational boost through its effect on productivity—output per hour per worker. The increase the economy received from the Boomers’ education cannot be repeated. Certainly, education will always benefit the US economy, but not to the same extent it did when college was first becoming widely attended.

The problem is that the majority of people go to college. Even if the US experienced an educational renaissance, the potential marginal gain is minimal compared to that of the Boomer generation.

So sure, everyone wants the good ole days back. But it’s not happening. To a large degree, the economic pieces driving the boom were determined long before the boom itself took place. You cannot re-reap the benefits of educating large swaths of society to new levels. Or replicate the positive repercussions of the invention and utilization of the Internet on productivity. The good ole days were frankly a nearly perfect storm of economic benefits colliding at once.

This Is Normal

So the good ole days aren’t coming back. Now what? The US is set to suffer through a period where growth is not going to be the same as previous decades. For a time, US growth will simply not be as robust.

Demographics are going to be a drag for a long time. The demographic dynamics were determined long ago, and there is no “quick fix.” Unlike tax rates or regulations, improving demographics in the near term is nearly impossible. Sure, there are things that could be done to improve the situation in the longer term, but those cannot kick in for a generation. In fact, this is the “new normal” of slower, tepid growth in workers—a persistent and substantial drag on the US economy.

Demographics are a problem… and an understandable one. However, productivity is far less predictable and more nuanced. Productivity tends oscillate in unpredictable cycles. After all, predicting when a game-changing technology such as electricity or the Internet will be invented and alter the economic landscape is inherently difficult, if not impossible.

Another frustrating characteristic of productivity is its tendency to either be doing well or poorly for long stretches of time. Now, it is a slog and will continue to be. How long? Nobody knows, but there is no sign of a pickup thus far. Lower productivity is, like sluggish worker growth, the “new normal”.

Maybe Both Are Correct

A long time is not forever. Yes, demographics will be a headwind as the Boomers retire, and it will take a while to get through it. Eventually, however, the headwind will subside. Productivity growth is slow and shows no signs of accelerating. But something will come along that jump starts it. Some new invention will change society and the way we work. Predicting when that will happen is a fool’s errand. What is certain, though, is that nothing lasts forever.

In Texas, the speed limits are high. This causes changes to a slower speed to feel tedious—like you should be going faster. There is a particular sadness and unrelenting rage when the “Slow Ahead” signs begin to appear. This is where the US economy finds itself today. The US is well into the slower speed zone. There is no indication of when it will end, and it is agonizing. Eventually, however, the slow zone will end. We just don’t know when.

Samuel Rines is a regular contributor to Mauldin Economics. He is the Senior Economist and Portfolio Strategist at Avalon Advisors in Houston, TX.