For the first time in a year, worker productivity is up
For the first time in a year, worker productivity is up
Increasingly, this looks like a Goldilocks economy: Job creation chugging along, wage growth still strong, and now outpacing inflation. And then, we got another piece of surprisingly good news last week on labor productivity, which is a key measure of how, well, productive American workers are.
After falling for more than a year — the longest losing streak since the 1940s — productivity actually increased in the second quarter, from April to June.
Productivity basically measures the value of all the stuff American workers make, and the services they provide, per hours worked.
When productivity goes up, it means workers are getting more efficient and profitable, benefiting from new technology or work processes.
Like what’s happening at my local grocery store, where they’ve installed new self-checkout kiosks, freeing up human cashiers to watch the machines and do other work.
Multiply that across the whole economy, said Paul Ashworth at Capital Economics.
“What’s happened over the last 12 months, productivity has increased by 1.3% — pretty average, but better than we’ve had for the past year or so,” he said. “So the trend seems to be improving.”
Now, this could just be a statistical blip, said David Royal at financial services firm Thrivent.
“These productivity numbers bounce around a lot,” he said. “They’re some of the least reliable economic data that we have, because it’s such a tough thing to measure.”
Still, there’s good reason to think productivity really is on the rise now.
Josh Bivens at the Economic Policy Institute said that after lots of churn in the pandemic, company workforces are stabilizing.
“It takes time to take all those new workers you’ve hired and get them working in a way that really adds to the productivity of a firm,” he said.
Also, with workers hard to find, companies are investing in labor-saving technology, said Paul Ashworth — like AI and machine-learning.
“It’s possible that we’re seeing the beginnings of a new productivity boom like we saw in the 1990s and early 2000s, when desktop computers and the internet were integrated into the workplace,” he said.
David Royal sees huge potential here, including at his firm.
“Thrivent has got about 2,600 financial advisors. What they’re really valued by our clients for is that face-to-face relationship — not processing a bunch of paperwork,” he said. “If you could have AI do a lot of the back-office work, that would be an enormous productivity gain.”
And here’s why this matters: Higher productivity improves the standard of living.
Workers can pump out more stuff and provide more services without working more hours.
So companies don’t necessarily need to raise prices to pay workers more. So at least in theory they could use the profits from higher productivity to raise wages instead.
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