Labor Productivity Was 0.0% in 4Q17

Here’s a good news, bad news announcement: the U.S. Bureau of Labor Statistics has revised its estimate of fourth quarter 2017 labor productivity upwards – from a previously-reported negative 0.1 percent to 0.0 percent.

That’s right, a big goose egg counts as good news. That’s how lousy the growth in labor productivity has been in recent years.

Labor productivity (or output per worker) has fallen from an average of 2.6% per year in 1999–2006 to 2.4% in 2007–2014.

Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked by all persons, including employees, proprietors, and unpaid family workers.

However, Total Factor Productivity (TFP) growth—which combines the effects of improvement in efficiency and technology and innovation – has all but collapsed in recent years. It fell from an average of 1.3% in 1999–2006 to just 0.3% in 2007–2014.

Without gains in productivity it is unlikely that the economy will grow at the robust rates seen in the 1980s and 1990s.

From the fourth quarter of 2016 to the fourth quarter of 2017, productivity increased a pathetic 1.1 percent, reflecting a 3.2-percent increase in output and a 2.1-percent increase in hours worked.

Annual average productivity increased 1.2 percent from 2016 to 2017.

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