Good summary from IHS Global Insight of the new US productivity numbers:
Nonfarm business sector labor productivity increased at a 1.6% annual rate in the third quarter, up 0.4% from a year earlier; output increased 1.2% while hours dipped 0.5%, particularly for self-employed workers. … Over the past five years, productivity growth has averaged 0.6% (the historical average over 1947-2014: 2.2%). Its growth this year is likely to be under 1.0%.
The slowdown in productivity growth started about 10 years ago. The Great Recession muddied the data, making it difficult to tell whether the slowdown was a byproduct of the business cycle or something fundamental. In recent years, it has become clear that the trend growth rate of labor productivity has slowed sharply.
What’s going on? It’s a puzzle. Views include Robert Gordon’s of Northwestern University, whose soon-to-be-published book, The Rise and Fall of American Growth will fuel the discussion further: “the digital electronics revolution has begun to encounter diminishing returns…. a decline in the ‘dynamism’ of the economy as measured by the rate of creation of new firms.”; Google’s Chief economist Hal Varian’s: Economic growth and productivity are understated, because government statisticians are not able to measure the value of many innovations; Paul Krugman’s (New York Times column, 25 May): “So what do I think is going on with technology? The answer is that I don’t know — but neither does anyone else.”
The recent slowdown in payroll employment may be related to the stall in productivity growth. Why hire more workers if they end up producing a pittance more? Should we be worried about productivity? Yes, because in the long-run, it is the best measure of an economy’s success. Applying the Rule of 72, if growth is 2%, the pie doubles every 35 years; if growth is 1%, it doubles every 72 years; and, as it is now, if growth is 0.5%, it doubles every 144 years.
These are the exact issues to be discussed at an AEI event, November 17: “The great American stagnation — or acceleration?
from AEI » Latest Content http://ift.tt/1PpH5bU
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