Interesting. I’m not convinced, though, that trend labor productivity growth really has increased. Rather the elevated productivity growth rates seen over the past year or so likely reflected more a catch up dynamic. And more recently labor productivity still undershoots the level of its trend (based on an average of statistical trend estimates) but this catch up is close to getting completed. The tailwinds of high labor productivity growth might well fade in 2025.
Not convinced. Raising prices and increasing the velocity of money, which is easy to do in the service economy, coupled with increased online purchasing and online advertising, can greatly increase the GDP without increasing hours worked. A strong dollar also helps. Doctors giving patients 10 minutes, instead of 1/2 hour, and charging more than 1/.3 the previous rate, greatly increases productivity but not recommended.
Why would other nations, many of whom have also experienced inflation and loose monetary & fiscal policy, not be experiencing similar productivity growth?
Service sector inflation has been much lower in other nations - at peak, 7.6 in USA, 5.2 in Germany, 3.9 in France, and 2.3 in Japan. They may not have increased the velocity of money, or increased online purchasing and online advertising. They may also have weakened currencies. In the socialized medicine nations, doctors may give giving patients 10 minutes, instead of 1/2 hour, but they can't charge more than 1/.3 the previous rate.
Also headline inflation understates true increase in price of certain low tech services (example food service) which makes the productivity of the (restaurant) worker appear higher.
Was curious if you had heard the theory that the great resignation increased productivity. I first heard a version of it from Danny Dayan, but the loose version is something like older workers are the least productive workers in firms. Especially some of the highest earning workers that also produce the least. He has predicted that we are entering a high productivity era for that and other reasons.
It's a variant of the science progresses one funeral at a time or the research that has shown that older academics gate and obstruct newer academics; when they die/retire more novel research is generated.
It's not just the older workers. One of my conclusions from a long career in business is that any large firm accumulates unproductive employees - individuals who aren't doing well but never screw up badly enough to get fired. In a firm these stay in place until there are layoffs; the first layoff clears most of them out and the next finishes the job. The remaining employees became more productive because they no longer had to compensate for the unproductive ones; the laid-off employees found jobs they were better suited to, or retired. We may have seen an example of this scaled up to the entire US economy.
Awesome article! I’d imagine soon software AI breakthroughs will cause even more productivity boom in the USA. I believe technologies such as computer use AI will transform the labor market and increase salaries!
Readily available energy at affordable costs is a major contributing factor. The other factor is the amount of arms sold to other countries with no capacity built into their economies to produce that resource. Food and arable land. Resources generally are nice to have. The metrics are clear and available and hopefully will remain available. Nice cylinder article on growth.
Interesting. I’m not convinced, though, that trend labor productivity growth really has increased. Rather the elevated productivity growth rates seen over the past year or so likely reflected more a catch up dynamic. And more recently labor productivity still undershoots the level of its trend (based on an average of statistical trend estimates) but this catch up is close to getting completed. The tailwinds of high labor productivity growth might well fade in 2025.
https://open.substack.com/pub/janjjgroen/p/q3-2024-productivity-and-wages-still
Not convinced. Raising prices and increasing the velocity of money, which is easy to do in the service economy, coupled with increased online purchasing and online advertising, can greatly increase the GDP without increasing hours worked. A strong dollar also helps. Doctors giving patients 10 minutes, instead of 1/2 hour, and charging more than 1/.3 the previous rate, greatly increases productivity but not recommended.
Why would other nations, many of whom have also experienced inflation and loose monetary & fiscal policy, not be experiencing similar productivity growth?
Service sector inflation has been much lower in other nations - at peak, 7.6 in USA, 5.2 in Germany, 3.9 in France, and 2.3 in Japan. They may not have increased the velocity of money, or increased online purchasing and online advertising. They may also have weakened currencies. In the socialized medicine nations, doctors may give giving patients 10 minutes, instead of 1/2 hour, but they can't charge more than 1/.3 the previous rate.
Also headline inflation understates true increase in price of certain low tech services (example food service) which makes the productivity of the (restaurant) worker appear higher.
It’s not labor productivity. Certainly not compensated. If it’s anything, it’s capital productivity.
Was curious if you had heard the theory that the great resignation increased productivity. I first heard a version of it from Danny Dayan, but the loose version is something like older workers are the least productive workers in firms. Especially some of the highest earning workers that also produce the least. He has predicted that we are entering a high productivity era for that and other reasons.
It's a variant of the science progresses one funeral at a time or the research that has shown that older academics gate and obstruct newer academics; when they die/retire more novel research is generated.
It's not just the older workers. One of my conclusions from a long career in business is that any large firm accumulates unproductive employees - individuals who aren't doing well but never screw up badly enough to get fired. In a firm these stay in place until there are layoffs; the first layoff clears most of them out and the next finishes the job. The remaining employees became more productive because they no longer had to compensate for the unproductive ones; the laid-off employees found jobs they were better suited to, or retired. We may have seen an example of this scaled up to the entire US economy.
Awesome article! I’d imagine soon software AI breakthroughs will cause even more productivity boom in the USA. I believe technologies such as computer use AI will transform the labor market and increase salaries!
Very impressive article.
Any thoughts on how long this could last?
Great analogy in the conclusion with the “bulking” and “cutting”!
Great piece!
All of the productivity gains have primarily benefitted those who run the corporations.
Interesting article
And workers get just about fuck-all in return for their productivity.
Americans are productive!
Readily available energy at affordable costs is a major contributing factor. The other factor is the amount of arms sold to other countries with no capacity built into their economies to produce that resource. Food and arable land. Resources generally are nice to have. The metrics are clear and available and hopefully will remain available. Nice cylinder article on growth.
2020-2024 WAS NOT TOO SHABBY!