A second reason for optimism about productivity is that even if most major economies have exploited most available opportunities for integration, gains may still be had from improvements to existing supply chains. Economies evolve over time, and comparative advantages are not set in stone. Consider China, which for years was the main destination for outsourced production. Today, its working-age population is shrinking.
Core inflation was only 0.7 percent in 2010, compared with around 2–1/2 percent in 2007, the year before the recession began. Wage growth has slowed as well, with average hourly earnings increasing only 1.8 percent last year. These downward trends in wage and price inflation are not surprising, given the substantial slack in the economy.