##wanger, ron jarmin, and javier miranda ( 2014 ), “ the role of entrepreneurship in u. s. job creation and economic dynamism, ” journal of economic perspectives, vol. 28 ( summer ), pp. 3 – 24. for an estimate of how the latest recession affected aggregate trend productivity growth in the united states, see reifschneider, wascher, and wilcox, “ aggregate supply in the united states, ” in note 8. see gadi barlevy ( 2005 ), “ why don ’ t recessions encourage more r & d spending? ( pdf ) ” chicago fed letter 220 ( chicago : federal reserve bank of chicago, november ) ; and diego comin and mark gertler ( 2006 ), “ medium - term business cycles, ” american economic review, vol. 93 ( june ), pp. 523 – 51. see congressional budget office, revisions to cbo ’ s projection of potential output, in note 7 ; hall, “ quantifying the lasting harm to the u. s. economy, ” in note 4 ; ball, “ long - term damage from the great recession, ” in note 4 ; and reifschneider, wascher, and wilcox, “ aggregate supply in the united states, ” in note 8. there is considerable debate about how much of the decline in the employment - to - population ratio and labor force participation has been due to the recession, how much of that decline is reversible, and, relatedly, how much of the decline would have occurred regardless in the absence of a recession. for the argument that much of the decrease in labor force participation would likely have occurred even in the absence of the bis central bankers ’ speeches have resulted from lower trend labor productivity due to reduced capital investment and “ multifactor productivity, ” which is often thought of as capturing the effects of technological innovation. 12 the employment rebound suggests that strong measures – such as those the fed took during and after the crisis – can prevent even sharp job losses from becoming permanent. but the productivity slowdown suggests that monetary policy cannot, by itself, avert all of the damage. this consideration raises the question i mentioned a moment ago. should we think of this supply - side damage as permanent or temporary? in many previous episodes around the world, post - crisis reductions in output have proved permanent. nonetheless, it seems plausible that at least part of the damage can be reversed. as business confidence improves, employers

the towel and drop out. extended periods of weak demand appear to cause companies to invest less in plant and technology, which slows the growth of the productivity of the workforce. the number of new business formations declines sharply, perhaps because of reduced credit availability, which may depress hiring, productivity, business innovation, and hence trend output. 8 corporate spending on research and development has also been strongly procyclical, which may have similar effects. 9 turning to the recent u. s. experience, many economists now estimate that substantially more than half of the shortfall in gross domestic product relative to its pre - crisis trend represents a reduction of potential output and not just a shortfall in demand. 10 u. s. labor force damage likely accounts for some part of the shortfall. 11 the greater part appears to christina d. romer and david h. romer ( 2015 ), “ new evidence on the impact of financial crises in advanced countries, ” nber working paper series 21021 ( cambridge, mass. : national bureau of economic research, march ). for example, martin, munyan, and wilson show that estimates of potential output generated by common filtering techniques tend to revise down following recessions as actual output grows slower than its prerecession trend ; see martin, munyan, and wilson, “ potential output and recessions, ” in note 5. in other words, looking backward with many years of hindsight at the evolution of output following a financial crisis, the negative effect on potential output is clearer than it is when estimating the level of potential output in real time immediately following the crises. as an example of this type of exercise, see furceri and mourougane, “ effect of financial crises on potential output, ” in note 5. see congressional budget office ( 2014 ), revisions to cbo ’ s projection of potential output since 2007 ( pdf ) ( washington : cbo, february ). see dave reifschneider, william wascher, and david wilcox ( 2013 ), “ aggregate supply in the united states : recent developments and implications for the conduct of monetary policy, ” finance and economics discussion series 2013 – 77 ( washington : board of governors of the federal reserve system, november ) ; and hall, “ quantifying the lasting harm to the u. s. economy, ” in note 4. for evidence regarding the link between fewer start - ups and lower job growth, see ryan decker, john halti