Wednesday, August 12, 2015

The Great Productivity Slowdown

Although we've seen fairly solid employment gains recently, there's a troubling measure that hasn't kept pace: The productivity of nonfarm business workers, or the output of goods and services per hour worked, increased at just a 1.3 percent seasonally adjusted annual rate in the second quarter, the Labor Department said Tuesday. The long-term average for productivity growth is 2.2 percent.

But the longer-term prognosis is even worse. That 1.3 percent gain followed two consecutive quarterly declines. From a year earlier, productivity was up just 0.3 percent.

On top of that, the Labor Department also revised some earlier numbers downward. It's now believed that labor productivity was flat in 2013, down from an earlier estimate of 0.9 percent improvement. Over the past five years, productivity has grown at just 0.4 percent annual pace—the weakest growth we've seen since the early 1980s.

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