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posted on 21 October 2017

Is America Becoming More Productive?

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How efficient is the USA using its labor force in terms of labor vs income / products produced? Seems like productivity is growing differently than it did before the Great Recession.


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The headline view says current productivity growth is about average to what was witnessed since the 1980s.

My view of productivity is very different from the headline view. Productivity is complicated - far too complicated for economists to come to a conclusion satisfactory to this simple Industrial Engineer:

Generally speaking, productivity is, in industrial engineering, defined as the relation of output (i.e. produced goods) to input (i.e. consumed resources) in the manufacturing transformation process.

Productivity assessments even within a single company are very complicated, and are impossible to accurately forecast when one wants to discuss an entire sector or economy. There are some rough tools which will get one into the ballpark of productivity improvement. The following graphs on manufacturing, investment, retail trade and health care are comparing inflation adjusted growth of that sector to employment growth in that sector.

In the case of manufacturing, output (blue line) and employment are now growing at the same rate. Prior to the Great Recession, output grew whilst employment fell.

The above chart is saying there is no productivity growth in manufacturing - even with our belief that robotics are doing away with jobs.

A slightly different situation is true with construction. Since 2012, construction output and employment are growing at the same rate implying there is no productivity growth. But during the Great Recession and its immediate aftermath, productivity appears to have declined.

The only real productivity growth I can find is in the services sector. Beginning with the retail sector, the obvious gain in productivity is seen thoughout the graph below and continues today.

There seems to be a modest improvement in health care - should we attribute this to Obamacare?

The above look at productivity is down and dirty - but it should provide a realistic ballpark productivity assessment. Real productivity should not have significant fluctuations except during recessions which makes one skeptical of the headline view. But as much press as is given to robotics, there is little evidence robotics are affecting jobs.

Other Economic News this Week:

The Econintersect Economic Index for October 2017 dropped below the range seen for the previous 5 months - and is now in a range associated with below normal growth. Six-month employment growth forecast is indicating improvement.

Bankruptcies this Week from bankruptcydata.com: Privately-held Castex Energy Partners

Weekly Economic Release Scorecard:

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