Between 1995 and 2004, U.S. output per worker grew at a 2.9% annual rate, even faster than the impressive pre-1973 pace. It’s hard to attribute this to a change in any of those factors thought to have contributed to the slowdown in the seventies. Instead, the good news seems to be the result of a new set of favorable developments, chief among which is the way that computers and information technology have changed so much about the American workplace.
Whatever the explanation for the productivity gains of the last decade, the above graph displays every indication that this welcome development is continuing. Most recently, the Bureau of Labor Statistics reported productivity gains at a 3.2% annual rate for the first quarter and 2.2% annual rate for the second quarter of 2005.
So why doesn’t that get more attention in the press? I guess the headline, “decade of good news continues” just doesn’t sell as many papers.
When I was at the Fed, the staff gave a weekly briefing on economic indicators. I always felt that this encouraged short-term thinking, and I thought it was a poor idea. I understand that the President also gets frequent regular briefings on economic data, and that is pointless.
High-frequency macroeconomic data is mostly noise, and even the signal is mostly irrelevant. If I were allocating briefing time to macroeconomic data by importance, then the productivity trend would get most of the weight. Long-term productivity trends are worth paying attention to, but they tend to change slowly. You could have a once-a-year briefing on productivity and be quite well-informed about how the economy is doing.