Productivity, or output per hour, is an especially useful metric called upon to answer many questions about an economy. How efficient is production (i.e., how many widgets are we making per hour now versus before), how fast can living standards, wages, and incomes rise without generating inflation, is there evidence of technological advances boosting production? It’s also tricky to measure, especially as we move from manufacturing to services, but the BLS series plotted below is widely accepted as a solid indicator of these sorts of questions.
I’ve plotted the series in annual changes along with a smooth trend in order to help us think broadly about two assertions I hear often these days. First, firms are so profitable—which they are (I’ve got a piece coming out on this on the NYT Economix blog next week)—because they’ve been squeezing more productivity out of their workforce. Second, automation is displacing workers at a faster clip.
Would not both of these show up as faster productivity growth? And yet the trend has clearly decelerated (here’s Dean Baker on the automation question).
I’m not saying this is the final word by a long shot. From the mid-1980s to the mid-90s, economists said the same thing about computerization: if it’s so transformative, why isn’t it showing up in the productivity stats? And then, in the mid-1990s, as you see in the figure, the series did in fact accelerate quite sharply.
But at least first blush, and shaving with Occam’s razor, this decelerating trend in output per hour seems out of sync with those two popular assertions. Which leads me to wonder if folks are just bending themselves into a pretzel with such assertions when the real culprit is just good, I mean “bad,” old-fashioned weak demand.
Source: BLS, nonfarm productivity, quarterly data, yr/yr changes, and HP filter (lamda=1600)