Tag: Productivity

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You’ve hit your quota of online time for the day, and there’s nothing edifying or fun to see, but you keep scrolling because you’re tired or just inert. Now what?  This post is for me and any of you out there who want to invest your time in better things.  Here are twelve mentally and […]

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A major due date for my job will be crashing down on me like a tsunami.  I have an incredible amount to accomplish, and if I don’t get some powerful momentum, I’ll be like a whimpering surfer paddling before a giant wall of water. Fortunately, the deadline is still on the horizon, but it will […]

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A Bit of Good News About US Productivity Growth

 

There’s a lot good to report about the American economy, now well into its record 11th year of expansion. Unemployment is low, and real wages are rising. And as I recently wrote in my The Week column, “Look, if you’re a president who promised to make America great again, and the unemployment rate falls to its lowest level since the early 1950s, it arguably looks like you’re making American great again.” Indeed, Goldman Sachs is predicting the unemployment rate to will “fall to levels last seen during the Korean War, bringing a further pickup in wage growth to 3.5 percent.”

But one worrisome weak point continues to be uninspiring productivity growth. Productivity has risen at a so-so 1.4 percent annual rate over the past two years, up from an abysmal average of just 0.6 percent in the 2011-2016 period. Faster productivity growth boosts overall GDP growth and means faster wage growth, as well. That said, productivity growth may be stronger than the data suggest. This from Capital Economics:

America’s Chronic Productivity Problem Returns, at Least for Now

 

The American economy hasn’t generated decent productivity growth since 2005 (not counting the Financial Crisis-skewed years of 2009 and 2010). Indeed, if you’re going to talk about how American capitalism is “broken” or dysfunctional, you should really lead with productivity rather than the “problem” of having too many super-entrepreneur billionaires. If living standards are going to rise anywhere near as fast in the future as in the past, greater innovation-driven productivity growth will be indispensable.

So it was really encouraging to see sharply faster productivity growth in the first half of 2019, 3.5 percent annualized in Q1 and 2.5 percent in Q2. Also encouraging: multifactor productivity — the part of productivity growth accounted for by technological progress rather than better-trained workers or more buildings and software — rose by 1.0 percent in 2018, the strongest gain since the current expansion began in 2010.

Stian Westlake joins City Journal editor Brian Anderson to discuss the future of productivity and how institutions and policymakers can adapt to the new “intangible” economy.

Throughout history, as documented in the book Capitalism Without Capital by Westlake and coauthor Jonathan Haskel, firms have invested in physical goods like machines and computers. As society has grown richer, companies have invested increasingly in “intangible” assets: research and development, branding, organizational development, and software. Today’s challenge is to build the institutions and enact the policies that will maximize the new economy’s potential.

AI is the Transformational Technology of Our Age … If Businesses Ever Adopt It

 

As I’ve blogged about at length in this space, the US economy won’t see sustained growth unless we can boost productivity. And there are a few different theories out there for why productivity growth has been so sluggish since the mid-2000s. Maybe ideas are becoming harder to find, maybe productivity has increased and we aren’t measuring it correctly, or maybe productivity growth is here but it’s just not evenly distributed yet.

If that last theory is correct, and there’s some reason to think it is (per a Commerce Department study, the digital sector has grown at an average annual rate of 5.6% over the last decade, compared to 1.5% overall), then the relevant question for policymakers is how to get these innovations to spread throughout the rest of the economy. That’s where the new McKinsey report “Notes from the AI Frontier” comes in. “Artificial intelligence (AI) stands out as a transformational technology of our digital age,” they write, and after studying 400 different use cases across 19 different industries, they estimate AI can “potentially enable the creation of between $3.5 trillion and $5.8 trillion in value annually” — if its use is broadly adopted.

This week on Banter, Bret Swanson explained why we should be optimistic about the future of technical innovation and the productivity gains it will foster. Swanson is a visiting fellow at AEI where he studies the impact of technology on the US economy, telecommunications, and internet regulation. He is also the president of Entropy Economics LLC, a strategic research firm advising investors and tech companies on technology, innovation, and the economy.

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June Jobs Report Shows Why Productivity Growth Remains Top Economic Challenge

 

By many measures, the June jobs report was a pretty good one. The US economy added a better-than-expected 220,000 net new jobs. And job growth for April and May was upgraded by 47,000. Sure, the jobless rate ticked up 0.1 to 4.4%. But that’s OK, because “a massive 361,000 increase in the labour force more than offset an otherwise solid 245,000 gain in the household survey measure of employment,” according to Capital Economics. Both the employment rate and the labor force participation rate edged higher.

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I’m avoiding the word “resolutions”–those sound wishy-washy and would be lucky to last a week. A couple of years ago, I set some goals, having just read Attack Your Day Before It Attacks You. This serious book left an impression and convinced me that I needed long-term and short-term goals. I had too many goals, and monthly […]

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Give Steven Mnuchin a Break: Much Faster Growth Is Possible During the Trump Presidency

 

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I certainly get the skepticism — bordering on mockery — toward this statement from Steven Mnuchin, Donald Trump’s Treasury secretary pick, on CNBC yesterday: “Let me just say our most important priority is sustained economic growth, and I think we can absolutely get to sustained 3 to 4% GDP and that is absolutely critical for the country.”

In response, ace Washington Post columnist Catherine Rampell tweeted: “sustained 4% growth, guys! got a bridge to sell you, too.” Indeed, I offered plenty of snark during the GOP presidential primary season when Jeb Bush made hitting a 4% growth target a key campaign policy plank. This blog post, for instance: “Why Jeb’s 4% growth goal might require the Singularity.”

Goldman Sachs Says the US Economy Should be Growing a Lot Faster Than GDP Stats Say. Here’s Why

 

Is the US economy doing better than we think? That is the upbeat thesis Goldman Sachs put forward in May, arguing that official statistics are mismeasuring productivity growth in the digital economy. Goldman economists Jan Hatzius and Kris Dawsey on the “productivity paradox,” as they put it:

Measured productivity growth has slowed sharply in recent years … But is the weakness for real? We have our doubts. Profit margins have risen to record levels, inflation has mostly surprised on the downside, overall equity prices have surged, and technology stocks have performed even better than the broader market. None of this feels like a major IT-led productivity slowdown. One potential explanation that reconciles these observations is that structural changes in the US economy may have resulted in a statistical understatement of real GDP growth. There are several possible areas of concern, but the rapid growth of software and digital content—where quality-adjusted prices and real output are much harder to measure than in most other sectors—seems particularly important.

Is There Really a Great Stagnation? The Problem of Measuring Economic Growth in America’s Digital Economy

 

shutterstock_282670979Last month, Goldman Sachs economists Jan Hatzius and Kris Dawsey put out a research report arguing US government statistics understate GDP growth because they understate productivity growth. Over the past five years, productivity growth has averaged 0.6% annually vs. 2.6%  over the prior 15 years. Here’s the gist of Goldman’s argument in “Productivity Paradox v2.0″:

— Measured productivity growth has slowed sharply in recent years, and we have reduced our working assumption for the underlying trend to 1½%. This is the same sluggish rate that prevailed from 1973 to 1995 and stands well below the long-term US average of 2¼%. The proximate cause of the slowdown is a slump in the measured contribution from information technology.

 But is the weakness for real? We have our doubts. Profit margins have risen to record levels, inflation has mostly surprised on the downside, overall equity prices have surged, and technology stocks have performed even better than the broader market. None of this feels like a major IT-led productivity slowdown.