As of 2015, U.S. log output per capita was 12 percent below what its pre-2008 linear trend
would predict. To understand why, I develop and estimate a model of the US with
demographics, real and monetary shocks, and the occasionally binding ZLB on nominal
rates. Demographic changes generate slow-moving trends in the real interest rate,
employment, and productivity. I find that demographics alone can explain one-third of
the gap between log output per capita and its linear trend in 2015. Demographics also
lowered real rates, causing the ZLB to bind between 2009 and 2015, contributing to the
slow recovery after the Great Recession.