The economy has suffered from an adverse demand shock – the sharp contraction of 2008-2009 – and from two types of adverse supply shock. First of all, the trend path for productivity is almost certainly lower than most people had expected before the economic crisis (although trend growth is probably little changed). Not only did productivity levels fall during the crisis, but there has been no real sign of the sort of recovery which might have been expected if the decline in productivity had simply been a temporary consequence of the disruption associated with the credit crunch. .
