25 Apr 2016
US: Historical context on the productivity slump – Goldman Sachs
Research Team at Goldman Sachs, suggests that over the last decade, growth in total factor productivity (TFP)—gains in output not accounted for by labor and capital inputs—has slowed to a crawl.
Key Quotes
“We think this in part reflects measurement bias in the national accounts. But to the degree that low TFP growth reflects a sluggish pace of innovation, it is a troubling development for the US economy.
We see three main messages in the data. First, US productivity growth appears stationary over long periods of time—including pre-WWII data shows that TFP growth has not generally trended lower over time.
Second, TFP growth across developed market economies tends to mean revert, but only very slowly. Third, industry-level data suggest that aggregate TFP growth does not come about from a steady advance of innovation across the economy, but from sector-specific developments that propel growth for a time.
Taken together, we see reasons for near-term pessimism but medium-term optimism on trend productivity growth. Statistically speaking, there is little reason to expect TFP growth to rebound much closer to historical averages over the near term. Yet history also shows that TFP growth tends to mean revert across developed market economies, and our own view is that US productivity growth should rebound modestly in the coming years.”
Key Quotes
“We think this in part reflects measurement bias in the national accounts. But to the degree that low TFP growth reflects a sluggish pace of innovation, it is a troubling development for the US economy.
We see three main messages in the data. First, US productivity growth appears stationary over long periods of time—including pre-WWII data shows that TFP growth has not generally trended lower over time.
Second, TFP growth across developed market economies tends to mean revert, but only very slowly. Third, industry-level data suggest that aggregate TFP growth does not come about from a steady advance of innovation across the economy, but from sector-specific developments that propel growth for a time.
Taken together, we see reasons for near-term pessimism but medium-term optimism on trend productivity growth. Statistically speaking, there is little reason to expect TFP growth to rebound much closer to historical averages over the near term. Yet history also shows that TFP growth tends to mean revert across developed market economies, and our own view is that US productivity growth should rebound modestly in the coming years.”