Revised labor productivity figures for the second and third quarters came out from the Labor Department this morning, and they leave intact the basic stories told by last month’s advance figures (and in my post of November 6). First, productivity growth for the economy as a whole is lagging — which means one of America’s best hopes for boosting living standards sustainably, not through financial or government gimmickry, is fading. Second, for manufacturing, its sluggish recent performance remains far from the levels native speakers of English would associate with the word “renaissance.”
On a quarter-to-quarter basis, the second quarter 2014 productivity growth for nonfarm businesses stayed at 2.9 percent – a good deal better than its initial reading. But since the harsh winter generated a 4.5 percent sequential drop in the first quarter – the worst since 1981! – this kind of bounce-back still looks unimpressive. (The following sequential figures are all annualized.)
Moreover, the new figures confirmed a third quarter slowdown in productivity improvement during the third quarter. Sequentially, productivity growth was tabbed at only 2.3 percent (a small upgrade from the first 2.0 percent figure). And once the winter effect ended, year-on-year growth declined from 1.3 percent in the second quarter to 1.0 percent in the third.
The revised figures overall did push total productivity growth during the current economic recovery from 7.21 percent to 7.31 percent. But that figure remains much lower than growth during the last recovery. Although that expansion lasted a year longer than today’s, it saw labor productivity rise by 17.62 percent – more than twice as much.
The new data continue to portray manufacturing as a productivity leader for the U.S. economy (belying the popular claim by many economists that it deserves no special priority in government policymaking). But today’s statistics also underscore that manufacturing’s recent productivity performance is actually weakening, not strengthening, as would be expected in a period of genuine revival.
True, the second quarter’s sequential productivity growth for manufacturing was revised up for the second straight time. Originally pegged at 3.3 percent, and then upgraded to 3.5 percent, it now stands at 3.6 percent – considerably higher than the rate for nonfarm businesses. Interestingly, labor productivity in manufacturing did not take a big first quarter tumble. In fact, sequentially it increased by 3.2 percent.
(Two caveats re manufacturing labor productivity need to be noted. First, the manufacturing productivity numbers and the overall nonfarm numbers aren’t directly comparable since they’re measured in somewhat different ways. Second, none of the labor productivity data distinguish fully between recorded gains from genuine technological or managerial efficiencies, which ultimately are positive for workers and the economy as a whole, and gains resulting from more job offshoring, which isn’t. And this shortcoming is especially important for the highly globalized manufacturing sector.)
Yet this morning, the quarter-to-quarter figure for third quarter manufacturing labor productivity growth was revised down from 3.2 percent to 2.9 percent. The year-on-year rate remained at 2.7 percent, which means that this trend at least is still on the upswing.
Overall, though, the new data pushed manufacturing labor productivity growth during the current recovery down from 15.35 percent to 15.29 percent. That’s much less than the improvement during the last, somewhat longer, recovery (26.32 percent) – which clearly was no one’s idea of an industrial Golden Age. When manufacturing productivity starts growing faster than during that bubble decade, that’s when we’ll be able to talk about a manufacturing renaissance without sniggering.