Productivity growth is nothing short of the bedrock of progress—in the long run, creating more with the same amount of labor is the only way to dura

America's Productivity Boom - by Joseph Politano

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2024-11-25 19:00:07

Productivity growth is nothing short of the bedrock of progress—in the long run, creating more with the same amount of labor is the only way to durably increase wages, consumption, and society’s overall prosperity. That makes it such a historic achievement that American economic output per hour worked has risen 8.9% over the last five years—faster than the five years prior or any point in the 2010s—in spite of the COVID-19 pandemic. The already-great productivity recovery we had going into this year got a major upward revision from recent updates to GDP data, and preliminary estimates suggest they’ll get another boost as job growth will likely be revised down significantly at the start of next year.

That success is all the more remarkable compared to the dismal productivity numbers seen across many of America’s peer nations and how long it took US productivity growth to sustainably recover from the Great Recession. Since late 2019, the US has seen more than double the productivity growth of the next-fastest major comparable economy, building on an already significant lead it built up in the years before COVID. Plus, unlike the 2nd-place UK, the US has achieved this while increasing overall employment levels instead of leaving less-productive workers out of a job.

Historically, spurts of productivity growth are most concentrated in the manufacturing sector and manifest only slowly in services—in the classic example, it is hard for barbers to get faster at giving haircuts even as razor manufacturers rapidly get more productive. However, the endemic problems with American industry has meant that manufacturing productivity remains stagnant even amidst heavy government emphasis on industrial policy over the last four years. Thus, the nation’s recent productivity boom comes almost entirely from the service sector—cooks, programmers, drivers, nurses, bankers, teachers, cleaners, managers, caregivers, and more have all gotten significantly more efficient at their jobs over the last four years, with the gains in some subsectors being historically unprecedented in both speed and scale.