Source: Congressional Budget Office
John Schmitt and Dean Baker fear that the Clinton-era productivity growth boom is at an end. I think it is possible, but unlikely, and way too early to start panicking. Note the word "arguably" in their first sentence and the phrase "is sustained" in their second:
Comment is free: The real economic crisis: [A]rguably an even more fundamental problem facing the US economy: the sharp deceleration in productivity growth since the middle of 2004.... [I]f sustained... the deceleration in US productivity growth since the second half of 2004 is striking by historical standards. Between 1947 and 1973, the golden age of postwar capitalism, productivity growth averaged about 2.8% per year in the United States. At that pace, the output of the average worker was set to double about every 25 years, allowing roughly comparable increases in national living standards. From 1973 through 1995, however, productivity growth took a nosedive, with the average rate dropping to just 1.4%. At this lower rate, average worker output would take about 50 years to double, implying far slower progress in living standards.
From the mid-1990s on, however, official productivity growth again accelerated rapidly, returning to a 2.9% rate reminiscent of the golden age. Quite suddenly, though, in the second half of 2004, productivity growth dropped sharply. From the third quarter of 2004, productivity growth rate, at 1.3% per year, has not even managed to match the 1.4% growth rate of the productivity bust of 1973-1995.
Some productivity optimists argue that the downturn is a blip. But, this is a blip that just turned three years old - fully one-third the length of the nine-year 1996-2004 boom that the optimists champion. Other optimists dismiss recent performance as cyclical - related to the downturn in the US economy.... The productivity numbers are likely even worse than they look. The most important reason is that the official productivity figures don't handle the rapid depreciation of new technology very well...
Has no one that worries about such things ever learned how to calculate a confidence interval? (Even seeing std. errs would stop me griping.)
Let's tip our hat to Luca Benati, whose 2007 JEDC article provides some semblence of perspective to this overheated debate.
Posted by: Simon van Norden | October 22, 2007 at 07:44 AM
"Productivity" metrics is inherently flawed!
US so-called productivity gains of the PC revolution are priced in! Professionals work on a percentage of built-out cost! Their pricing isn't going down, it's going **up**! Computerized "productivity" is rising as fast as the R/E and stock market values! No productivity gains there )GDP/FTE/del t)!!
So what's pushing productivity up, if not outright bookcooking? Defense and government is what's skewing the numbers. Defense and government both have the lowest FTE/$'s of any activity on earth. E.g. War in Iraq at $450,000M with only 250,000 active agents.
That's some mighty "productive" agents!!
The Financials reap artificially inflated valuations on top of artificially devalued inflation, gaining higher "productivity" even in their own artifice annual report by reducing service levels to customers!
Pure charade! Forest for the trees!!
The most productive person on earth is the guy at the Fed Mint who burns old dollars!!
Posted by: Sheldon Timberlane | October 27, 2007 at 08:11 PM