U.S. productivity is up for the third quarter in a row. What does that mean?
U.S. productivity is up for the third quarter in a row. What does that mean?
Productivity for the nonfarm business sector increased 3.2% in the last quarter of 2023, according to the latest data from the Bureau of Labor Statistics.
With the caveat that these numbers are volatile and subject to revisions, that’s a significant increase in productivity for the third quarter in a row.
It is always a good sign when productivity is rising.
“When you think about what productivity is, it is the total amount of goods and services produced in our economy, divided by the total hours worked in the economy,” said Heidi Shierholz, president of the Economic Policy Institute.
Another way to think about it is the total amount of income the economy is generating per hour, she said.
“And when that goes up, that’s good for the economy,” she said. “That actually is what makes rising living standards over time possible.”
All sorts of different factors can contribute to productivity growth, she said. But “in general, over the long run, changes in productivity are really about changes in technology.”
Like the invention of computers and the internet.
But Keith Hall, a visiting fellow at the Mercatus Center at George Mason University, said the increase in productivity we’re seeing is not because of technological advances.
“The biggest thing really is the return of a healthy economy,” he said. “Having the recession associated with the pandemic, and then the struggle with inflation, we’re sort of coming out of that now.”
For the first few years of the pandemic, productivity was all over the map. Now, it’s about back to where it was in 2019.
But in the next few years, we’re likely to see a tech-fueled spurt in productivity, said Martin Baily, a senior fellow emeritus at The Brookings Institution.
“With all the developments in technology, including AI, but not just AI, I think I’m pretty optimistic,” he said.
We’re not really seeing the impact yet, he said. “We’re still developing AI, we’re still investing heavily in it, people are still learning to use it, myself included.” But it’s only a matter of time before it begins to pay off, he said.
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