The Mysterious Slowdown in U.S. Manufacturing Productivity

Danial Lashkari and Jeremy Pearce

No 20240711, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Throughout the twentieth century, steady technological and organizational innovations, along with the accumulation of productive capital, increased labor productivity at a steady rate of around 2 percent per year. However, the past two decades have witnessed a slowdown in labor productivity, measured as value added per hour worked. This slowdown has been particularly stark in the manufacturing sector, which historically has been a leading sector in driving the productivity of the aggregate U.S. economy. What makes this slowdown particularly puzzling is the fact that manufacturing accounts for the majority of U.S. research and development (R&D) expenditure. Despite several recent studies (see, for example, Syverson [2016]), much remains to be uncovered about the nature of this slowdown. This post illustrates a key facet of the mystery: the productivity slowdown appears to be pervasive across industries and across firms of various sizes.

Keywords: productivity; manufacturing; innovation; competition; economic growth (search for similar items in EconPapers)
JEL-codes: O33 O40 (search for similar items in EconPapers)
Date: 2024-07-11
New Economics Papers: this item is included in nep-eff
Note: Editor’s Note: A revision of this post states the BLS labor productivity as sectoral output per worker. An earlier version had this as value added per worker. (November 12, 2024)
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