Tags

, , , ,

Numerous students of the economy concluded from last Thursday’s official report on U.S. labor productivity that the nation is on the verge of – or even already experiencing – a major improvement in this key measure of economic efficiency and engine of sustainable (not bubble-y) prosperity. (See e.g., here and here.)

They’ve even advanced a reason that arguably passes the eye test: The surging adoption of artificial intelligence is enabling businesses to do much more with much less in the way of payrolls or hours workers are on the job – the definition of labor productivity growth.

My conclusion: Hold your horses.

Not that these preliminary figures weren’t encouraging. It’s just that even by recent standards (especially before most of ever heard of ChatGPT), they don’t look like an especially big deal.

On a quarter-to-quarter basis, labor productivity in the last quarter of last year rose by an excellent 0.79 percent. And this result followed an even stronger third quarter gain of 1.19 percent – the highest outside a recession since 2003 – and another encouraging improvement of 0.88 percent in the second quarter.

But in 2019, the quarterly advances were one percent, 0.90 percent, 0.88 percent, and 0.79 percent – practically the same as the 2023 performance. (During the peak pandemic year of 2020, dominated by a brief but punishing recession, labor productivity surged. But that’s typical of economic downturns, and the CCP Virus slump was way beyond typical and wreaked havoc with virtually all economic data.)

In addition, although the fourth quarter of 2023 saw the fourth straight increase in productivity growth (capping a period when the cumulative improvement was 2.89 percent), but there’s a recent precedent for that performance, too. The stretch between the fourth quarter of 2018 and the fourth quarter of 2019. And then, cumulative productivity growth came to a stronger 3.48 percent.

Perhaps most important, nothing about the newest report, or the previous release, suggests that the big decades-long slowdown in productivity growth is even close to ending.

Here are the figures for the last few economic expansions (based on apples-to-apples data that yield the most reliable comparisons): 

1990s expansion (2Q 1991-1Q 2001): +25.53 percent

bubble expansion (4Q 2001-4Q 2007): +16.03 percent

pre-CCP Virus expansion: (3Q 2009-4Q 2019): +13.77 percent

post-CCP Virus expansion: (3Q 2020-4Q 2023): +0.43 percent

In other words, since the economy’s rebound from the pandemic downturn, labor productivity has barely grown at all. So let’s wait till there’s an upsurge that’s at least close to improvements with lots of precedents before even thinking about a labor productivity boom.