Shifts in the Composition of Fixed Investment In the 1970s

In recent years, a relatively low rate of growth of real business investment has troubled U.S. economic performance. Since the last trough in economic activity in 1975, real investment has grown at an average rate of about 6.5 percent a year, compared with about 8 percent a year for the average of five previous business expansions. Although real GNP growth also was somewhat slower than in past expansions, some slippage in the share of output devoted to increasing and replacing productive facilities occurred over the past five years. Moreover, increases in employment (about 4 percent a year since 1975) have been stronger than past experience, suggesting a movement toward more labor-intensive operations in the business community.