Conclusion
At this point, we have a general understanding of the many factors—at both the economy-wide and industry levels—which may underlie the productivity slowdown since the mid-2000s. However, some questions remain, perhaps the most central one being: Is the U.S. economy now, as some researchers have suggested, in an intermittent lull in between waves of high growth, or, as others contend, in a “new normal” of lower growth that has resulted from fundamentally diminished returns to innovation? The answer is not known at the moment, and only time—and additional data in our time series—will tell us.
At the same time, one thing that we can say for certain about our present situation is that the productivity slowdown of the past decade and a half has left the U.S. economy in a weaker position—yielding a sizable loss of potential output during these years—and perhaps even more importantly, it has also left the economy in a weaker position going forward. This is because the productivity slowdown has resulted in a lower base of output from which to grow onward from here, relative to the more elevated starting position that the economy would instead now have if productivity had continued to grow at the long-term historical trend after 2005.
Thus, it will be important for participants of the U.S. economy to keep an eye on productivity data in coming years, to determine whether the slowdown since 2005 simply represented a periodic variation in trend, which can be explained from recent cyclical and noncyclical factors, as some observers have claimed, or whether it comes to be seen as a continuation of the low-growth economy of the last few decades of the 20th century. BLS productivity data, including labor productivity, multifactor productivity, and capital and labor data, at both the economy-wide and industry levels, will continue to shed light on this issue..
