Look Who’s Driving R&D Now
In June the U.S. economic recovery turns six. That’s old: The average expansion since World War II has lasted less than five years. Yet in some ways, this recovery never really launched. Growth remains weak, averaging around 2 percent since the recession ended. Wages are rising barely above the rate of inflation, and productivity, that magic ingredient that allows us to do more with less, is historically low, growing at less than half a percent a year over the life of the recovery. All this has fueled suspicions that the U.S. has slipped into permanently low growth—what economists call secular stagnation.
Yet there is hope on the horizon, if only a glimmer. Companies have been pouring money into research and development at the fastest pace in 50 years. From November through the end of March, U.S. companies funded R&D at an annual rate of $316 billion, or about 1.8 percent of gross domestic product, the largest share ever for the private sector. That’s up from 1.7 percent last year and 1.6 percent from 2007 to 2014. “If secular stagnation is a ‘thing,’ then U.S. companies are investing like crazy to make sure it doesn’t happen,” says Neil Dutta, senior U.S. economist at Renaissance Macro Research.