Labor productivity rates essentially measure the amount of gross domestic product created per hour of work. It is a crucial measure of both current and potential future economic performance. Simply stated, if you multiply the number of hours worked by the amount of output that each of those hours produces, you have defined total production. Fortunately, recent data for the United States indicates a significant uptick.
The US Bureau of Labor Statistics tracks this information. Over the past five years, labor productivity grew at an annualized rate of 1.9% percent (despite a pandemic in the timeframe), which is notably higher than the 1.5% annual rate of the previous business cycle (fourth quarter of 2007 through the fourth quarter of 2019). Even more impressive is the increase over the past couple of years, during which there was a 5% gain.
Productivity depends on many factors. From a broad perspective, infrastructure is essential. Highways, water supplies, broadband, and electricity are all crucial, and economic expansion depends on adequacy and efficiency. Education is also integral, from public schools through post-secondary options. Workers cannot be optimally productive without preparation ranging from literacy to high-quality training or higher education. Capital investment is another aspect, as employees need the right tools and systems.
