Productivity is set to fall in the US for the first time in more than three decades, raising the prospect of persistent wage stagnation and the risk of a further populist backlash. Research by the Conference Board, a US think-tank, also shows the rate of productivity growth sliding behind the feeble rates in other advanced economies, with gross domestic product per hour projected to drop by 0.2 per cent this year.
The San Francisco Fed tracks a different measure called utilization-adjusted total factor productivity, which they say is a better benchmark of technological improvements than old-school labor productivity. Here’s their current series:
These are 4-quarter growth rates, but the San Francisco Fed says that utilization-adjusted TFP has already gone negative on a pure quarterly basis: it was -2.66 percent in the last quarter of 2015 and -0.58 percent in the first quarter of 2016. So everyone agrees: no matter how you measure it, productivity growth is pretty weak these days. Is this because technological change has stagnated? Because low wages have prevented businesses from spending money on new labor-saving machinery? Because we’re not measuring the effect of the app economy properly?
Hard to say. Come back in a decade and I’ll tell you. In the meantime, it’s something to keep an eye on.