Although productivity is widely seen by informed students of the U.S. economy as the biggest key to ensuring the nation’s prosperity over the longest run, the release of the government’s new figures on these measures of efficiency rarely generates many headlines. Last week was no exception, but as always, they’re worth considering in detail.
In this case, last Thursday’s new report on labor productivity – the most current but narrower of the two measures — were most notable not for the preliminary estimate of the results for the first quarter of this year (which we’ll summarize below), but for revisions going back to 2013. And unfortunately, these resulted in little change to the feeble performance already reported in creating a unit of output per each person hour worked. Indeed, for manufacturing, the revisions amounted to a not-negligible downgrade.
Here are the two sets of figures for annual percentage gains in labor productivity between 2013 and 2017 for the non-farm business sector – the government’s main proxy for the entire American economy.
Previous results Revised results
2013 +0.3 percent +0.3 percent
2014 +1.0 percent +1.0 percent
2015 +1.3 percent +1.2 percent
2016 -0.1 percent 0
2017 +1.2 percent +1.3 percent
Like I said, no important differences here. In fact, on net, the revisions brighten the picture marginally. Not so for manufacturing:
Previous results Revised results
2013 +0.9 percent +0.9 percent
2014 0 0
2015 +0.2 percent +0.3 percent
2016 +0.4 percent -0.4 percent
2017 +0.7 percent +0.4 percent
Here we see a marked weakening, especially for the last two years. And the extent of manufacturing’s lousy record is even clearer from comparisons among the current economic recovery and its two predecessors.
non-farm business manufacturing
90s expansion: (2Q 1991 to 1Q 2001) +23.25 percent +45.86 percent
bubble expansion (4Q 2001 to 4Q 2007) +16.03 percent +30.23 percent
current expansion: (2Q 2009 to present) +9.70 percent +9.69 percent
Not only has labor productivity growth slowed much more dramatically in manufacturing than in the rest of the economy between the expansion of the 2000s – which of course ended in the worst national and global financial crisis since the Great Depression — and the current expansion. Manufacturing labor productivity actually has been growing more slowly in absolute terms during this recovery than non-farm business labor productivity. And it’s not as if non-farm business labor productivity has been killing it.
Those preliminary results for the first quarter of this year extend this narrative. On a quarter-to-quarter basis, both non-farm business labor productivity and manufacturing labor productivity increased – by 0.7 percent and 0.5 percent at an annual rate, respectively. But the revisions revealed a major slowdown in manufacturing labor productivity growth on a quarterly basis (from a downwardly revised — and kind of fishy — 4.5 percent on an annual basis) and a slight pickup in non-farm business productivity growth (from no growth at all at the end of last year).
The latest results for the broader measure of productivity growth – multi-factor productivity, which includes a range of inputs broader than just worker hours – showed a small uptick, too. So even though they’re not as current as the labor numbers, maybe we’re seeing the beginnings of lasting improvement in productivity growth generally speaking. But as the recovery-to-recovery data still make clear, the United States still has a long way to go before it genuinely shakes off its productivity blahs.