Labor productivity is a key macroeconomic measure: increasing output per hour worked increases standard of living.
Labor productivity is reported quarterly and can be noisy/volatile, so conclusions should not be inferred from short-term fluctuations in the data. Recessions and macroeconomic shocks like the pandemic add noise to the data as well, as important metrics like employment increase/decrease relative to more normal values, as one example.
In Q2 2022, labor productivity fell back to trend (after increasing above trend) and some reactions included
we have a disaster that can’t be mitigated and is very bad with 2+ million people not adding any value
What do the data say?
Have a look below at the trends since 1965 (about the last 60 years) for labor productivity, real wages and corporate profits (as percent of gross domestic income or GDI).
worker pay (real wages) is up, but productivity is up more as the lines have converged indicating workers are paid incrementally less to produce incrementally more
corporate profits look fine through 2022 (no data yet for 2023) - corporate profits as percent of GDI are near the highest they have been in recent times
there is no productivity disaster, labor productivity continues to trend higher and is the highest it has ever been
Did productivity recover by dumping all of the extra 2+ million workers?
No, the US added jobs presumably because businesses needed additional productive workers. On a net basis, nonfarm payrolls have grown by about 5 million from August 2022 to December 2023 (All Employees, Total Nonfarm (PAYNSA) | FRED | St. Louis Fed). Businesses retained those 2+ million and added another net 5 million.
Over the last 60 years, workers are producing more additional real output for a lesser increase in real wages while corporate profits as a percent of GDI over this time period are the highest they have been.
In the FRED chart, there is an EDIT GRAPH button in the upper right. You can add lines from other series (and also select options like display absolute amounts or percents such as year-over-year, month-over-month, etc) and also format (including use right and left y-axes).
Labor productivity per person in the EU has actually decreased since the end of 2019.
Between the fourth quarter of 2019 and the second quarter of 2024 labour productivity per hour worked increased by 0.9% in the euro area, whereas it increased by 6.7% in the United States. Labour productivity growth in the euro area has historically lagged behind that in the United States, but the developments in the euro area since the start of the pandemic have been particularly weak.
FWIW, the above article notes that labor productivity per hour for the public sector of the US has decreased in the last five years. It must be that myth of government inefficiency. (NB: It increased in other US sectors.)
Increase in productivity increases surplus. The distribution of that surplus is what governs whose standard of living increases or decreases. Additionally one must consider inflation and devaluation of the currency (hidden taxes).
You can go back a million years and you’ll find Alpha creatures dominating the Betas. Humans invented a palliative, Human Rights, to protect the individual from the masses and from Alphas. Then the Alphas bastardized the system by inventing non-existing Human Rights. Back to square one. Distressing!
Who has the extra power, in both money and time? The Alphas who rose to that situation. Search the embryo of the rich and famous. Most were born quite ordinary. Carnegie, just a messenger boy? Messi, just a kid who loved football? Sam Walton just a grocer? Commodore Vanderbilt, just deck swab on a NY ferry? Al Capone, just a street thug? Truman, just a haberdasher?
The Chinese proverb “rags to rags in three generations” says that family wealth does not last for three generations. The first generation makes the money, the second spends and the third sees none of the wealth!
The big problem with trying to level the playing field is that it is very hard to improve the Zees and very damaging to handicap the Alphas. Make the best of it that you can. My dad’s advice on dropping out of college despite being disappointed, “Whatever you do, do the best you can.” I was fascinated with rags to riches stories. Seldom do the nice guys win, it’s the go-getters who do. At the end what matters is being satisfied with the life you lived.
BTW, it’s hard to get promoted if you don’t train a substitute to fill your position. Much better than job security by holding others back.
A good indicator of how effective Biden was. He put in the right stimulus at the right time.
This higher USA productivity also suggests that DOGE is lying about the negative impact of telework.
Suspect this is mostly a pandemic effect. Government was working overtime during the pandemic (emergencies are when you need Big Government). Not surprised that productivity has declined in the aftermath. That contrasts with expectations for productivity changes in business as rising productivity is to be expected in a recovery.
BTW, public and private productivity are not really comparable. The mission of a democratic government is to provide services that are accessible and equitable to all. That doesn’t lend itself to efficiency and productivity. Tesla doesn’t have to worry about providing EVs to the poor.
But back in the day working in a restaurant I discovered alcoholics and coke heads will grab management positions. Awful working with them. With some power they are not fired when they should be. Want a reason why 95% of restaurants go out of business in the first year?
More like there are headcases not alphas. Self appointed spoiled entitled brats.
Sorry to hear you inhabit such a sad world. My father happened to be very successful in the hotel, restaurant, and catering business. On arriving in Venezuela the family set up a “Viennese Pastry.” My father drove the delivery van. My uncle sold the “Viennese Pastry” to Pepsico which bankrupt it. Other relatives sold their confectionary business to Nestle.
BTW, that was before DEI and other modern nonsense…
What I suggested is that this was a consequence of the pandemic. As noted in another thread, the federal government has not significantly increased in size in thirty years, despite a much bigger population and economy to deal with.
If productivity has declined, I think far more likely reasons are uncertain budgets and periodic shutdowns. Try running a business if every few months your spending becomes uncertain as a continuing resolution ends and you have to at least plan to shutdown for some unknown time as republicans bicker.
I was on a research project that required use of government facilities. Just the threat of a shutdown meant postponing preparation of time-sensitive expensive reagents until more certain times. Each budget debacle set us back weeks. Not great for efficiency.
And the pandemic was a consequence of, if not criminal, certainly of unethical behavior by people in government, a crisis which the healthcare industrial complex did not allow to go to waste.
