08 May May 2016 – Will Wage Growth & Business Investment Spark the Economy?
Sluggish Labor Productivity
The US economy continued its slow growth trajectory during the first quarter with the first reading of GDP showing only 0.5% growth. One factor in keeping growth subdued is low labor productivity – the output of goods and services for each hour of labor. As the chart below shows, the 5 year growth rate in labor productivity has dropped to levels last seen more than 30 years ago.
Sharp Slowdown in Productivity Growth: Real Nonfarm Business Productivity
Another way to view the same issue is to look at the cumulative real output per hour of all workers. In the chart below, the slope of the line changed after the financial crisis and has grown at a slower trajectory over the last 5 years.
Nonfarm Business Sector: Real Output Per Hour of All Persons
And finally, another way to view productivity is to review average growth in real output per worker over 10 year time frames, as illustrated here in this table.
Tom Searson, CFA