Productivity Growth Slows

The Labor Department reported that productivity growth slowed to 1.7% in the first quarter. That’s not a very good number, and productivity has been a bit sluggish in the past three years.
Still, today’s report marks an important milestone. The “American Productivity Miracle” began exactly ten years ago. This reversed a 24-year slide in productivity.
Despite weaker numbers in recent years, productivity has grown by an annual rate of 2.77% for the last ten years. To put that in perspective, in the ten years prior to that, productivity grew by just 1.56% a year. And in the ten years before that, it grew by just 1.23% a year.
It’s hard to overstate the importance of improved productivity. It allows workers to do more with less. Inflation is also kept down due to higher productivity, and by extension, interest rates are lowered.

Posted by on May 3rd, 2007 at 9:51 am


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