July 21, 2013

U.S. Productivity Growth: The Slowdown Has Returned After a Temporary Revival

There was never any slowdown in productivity growth in U.S. manufacturing during the postwar period, and indeed there was an unprecedented explosion of manufacturing productivity growth between 1996 and 2004. But the share of the manufacturing sector in the total economy has declined from 30 to 10 per cent since the 1950s. The record for the other 90 per cent, consisting of all the economy outside of manufacturing, is far less encouraging; in non-manufacturing labour productivity growth fell from 2.95 per cent per year in 1948-72 to 1.29 per cent per year in 1972-96. After a brief revival to 2.63 per cent in the brief eight-year period 1996-2004, the growth rate slumped again to 1.47 in the past eight years. This examination of the data provides evidence that the revival of productivity growth associated with the dot.com revolution is over, that multifactor productivity growth in the total economy has returned to the rate achieved in the post-1972 slowdown years.