Jump on the productivity merry-go-round!

May 18th, 2017 at 5:14 pm

That’s the new game all the nerds are playing. You just write down all the reasons why people say productivity isn’t growing as fast as it was 15 years ago, and you ask noted productivity expert John Fernald: “Whussup with that?”

That’s what Ben and I do in the latest episode of the On the Economy podcast, which you can listen to on SoundcloudiTunesStitchrGoogle Play, and TuneIn.

Of course, while podcasts are fun and convenient, they don’t support graphs, so here’s a graph of year-over-year changes in productivity growth. Fernald points out how noisy the series is, so I’ve added a slow-moving trend which captures the important facts of the data: productivity was growing at around 3% until the mid-1970s. Since then, it’s grown a lot slower than that, though that hump in the latter 1990s is something to which we devote a lot of analysis in the podcast. At any rate, over the last decade, productivity has grown at around 1.2.

Source: BLS, my analysis

Even while we’re crackin’ wise and having fun in the discussion, it’s essential to recognize that when President Trump and Secretary Mnuchin go on about how their awesome program is going to deliver 3% growth, they’re mainly talking about changing that trend in the picture, about which Ben, John, and I are all duly skeptical. (I discuss their real motivation for such nonsense here–the faster growth assumption sops up a bunch of red ink caused by their big, regressive tax cuts.)

Special bonus for OTE’ers: You’ll hear a snippet of Eliane Elias on the podcast, but here’s one of her recent concert performances that’s worth a close listen.

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4 comments in reply to "Jump on the productivity merry-go-round!"

  1. JF says:

    And think what the stat series would give as ratios if we reached the over 83 percent of the 25-54 employment to population metric that exists in Japan.

    Society should reach for these higher ratios as people want to work and contribute.

    As for these priductivity statistical series or programs remember their noise and remember that they use paid-employment as one of the factors in the stat program, not work itself. A grain of salt in every aspect. Glad to see the noisiness reminder!

    Society should reach for higher employment to population ratios, and honor work of all kinds. Perhaps other stat programs need to replace this one so we keep our head straight.

  2. Smith says:

    Lack of Demand. Why would business need to think about productivity in an underutilized economy with excess capacity? Business is hard pressed to spend more money and think of ways to create more product when they can’t sell when they already are making or offering. Yes they can increase profits with less workers. But the procedure for business is not to reduce workers, just replace them with lower paid workers. Profits increase, productivity goes nowhere. It actually may decline since lower wages encourages business to expand production or services by hiring more workers instead of finding greater productivity of highly paid workers (the German model).
    Growth leads productivity, not the other way around. Why is there no acknowledgement of this, even as something you must address and refute?

  3. Tom Cantlon says:

    What do you think of Pearlstein’s review of Mervyn King’s complaint?

    • Jared Bernstein says:

      I’m writing something on Mervyn King’s speech. I liked it, as you’ll see.