Why U.S. workers keep getting more productive

Summary

Summary of "Why U.S. Workers Keep Getting More Productive" – The Indicator from Planet Money

Podcast Information:

• Title: The Indicator from Planet Money
• Host/Author: NPR (Adrienne Ma and Waylon Wong)
• Episode: Why U.S. Workers Keep Getting More Productive
• Release Date: June 6, 2025
• Description: A deep dive into the unexpected surge in U.S. labor productivity, exploring the underlying factors and economic implications.

---

Introduction to Labor Productivity

Adrienne Ma and Waylon Wong open the episode by highlighting the latest employment statistics from the Bureau of Labor Statistics (BLS). In May, the U.S. economy added 139,000 jobs, maintaining an unemployment rate of 4.2%.

Adrienne Ma [00:14]:

"If you're a faithful indicator listener, you know that we like to look at the BLS's what they call the Employment Situation Report every month because it's a snapshot of how everyday people are doing in the economy."

However, the episode shifts focus to a less-discussed but equally important metric: labor productivity growth. This measure assesses worker output and has been on an upward trend for the past few years, puzzling economists regarding its sustained increase.

---

Understanding Labor Productivity

Waylon Wong [03:25]:

"A measure of labor productivity is output per hour. Economists use data from Gross Domestic Product reports to calculate this number."

Rather than counting physical units produced, the BLS calculates productivity by assessing the value of output. For instance, in manufacturing, it's the value of widgets produced, and in services like restaurants, it's sales per worker.

Austan Goolsbee [04:02]:

"It's like you're, you know, when your kids are growing, you can look back at markers of pencil on the doorframe, but in the moment, they just look the same as they always looked."

---

The Productivity Spike: Pre-Pandemic and Post-Pandemic Trends

Initially, productivity dipped at the onset of the COVID-19 pandemic but began rebounding in late 2022. Astonishingly, the growth rates have surpassed pre-pandemic levels, marking a significant deviation from the previous decade's trend.

Austan Goolsbee [04:14]:

"But then it kept looking really quite good. Better than pre Covid. And now we've got two solid years where productivity growth has been well above the previous decade or two trend line."

Historically, labor productivity growth hovered around 1% annually during the 2010s. Recently, this figure has doubled to approximately 2% per year, an unexpected surge that has left economists intrigued and searching for explanations.

---

Analyzing the Anomaly: Productivity Growth Falls in 1Q20

Despite the overall upward trend, there are fluctuations. Notably, BLS data from the first quarter of 2020 showed a 1.5% decline in productivity growth.

Austan Goolsbee [05:14]:

"Productivity is a really noisy number, so you gotta be careful."

This dip was attributed to an unusual surge in imports due to tariffs, which adversely affected GDP figures and, subsequently, productivity calculations. Goolsbee emphasizes the importance of viewing productivity over longer periods to discern meaningful trends.

---

Economic Implications of Rising Productivity

Higher productivity growth is highly favorable for the economy. It allows wages to rise without triggering inflation and reduces the need for immediate interest rate hikes. Fundamentally, sustained productivity growth underpins the U.S.'s status as the world's wealthiest major economy.

Austan Goolsbee [05:51]:

"There is a very real sense in which if productivity growth is higher, even modestly higher for a sustained period, everything is wonderful. Our wages can grow faster without inflation. The interest rate doesn't have to go up in the short run. At the end of the day, it is productivity that made us the richest major economy in the world."

---

Exploring the Reasons Behind Increased Productivity

Austan Goolsbee outlines four primary theories that might explain the sustained increase in U.S. labor productivity:

1. More People Working from Home

   Austan Goolsbee [06:28]:

   "You got a couple of researchers going out and making the case that people can be more productive per work or per hour if they can have that flexibility."

   Adrienne Ma [07:25]: Clarifies that while remote work can boost productivity, Goolsbee views this as a temporary effect rather than a driver of sustained growth.

2. Labor Reallocation

   This theory suggests that the "Great Resignation" led to workers moving into roles that better match their skills and interests, thereby enhancing productivity.

   Austan Goolsbee [07:36]:

   "That is exactly why you never want to hire a person with a PhD in economics to work on your marketing."

   However, Goolsbee notes that this reshuffling seems to be a one-time event rather than an ongoing factor contributing to continuous productivity gains.

3. New Business Creation

   There has been a recent surge in new business applications in the U.S., particularly during the pandemic.

   Austan Goolsbee [08:20]:

   "And historically new businesses often have faster productivity growth or higher productivity."

   New firms often drive innovation and efficiency, which can elevate overall productivity. Nevertheless, Goolsbee remains cautious, suggesting that this may also represent a temporary boost rather than a lasting change.

4. Artificial Intelligence (AI)

   Perhaps the most intriguing and potentially transformative factor, AI, is posited as a catalyst for long-term productivity improvements.

   Austan Goolsbee [08:47]:

   "So AI proves to be as transformative, that could boost productivity in a lasting way."

   Historical precedents, such as the introduction of electricity and computers, show that new technologies can eventually lead to significant productivity booms as their benefits permeate various industries over time.

   Austan Goolsbee [09:04]:

   "So electricity comes in. It is electricity production where there's a massive increase in productivity. Then after a little bit of time it kind of filters its way through the economy and you see a boom in productivity in the most electricity intensive industries. So aluminum gets more productive and then with another lag of a lot of years, people start building businesses around the presence of electricity and then you see the productivity continue."

Adrienne Ma [09:42]: Connects these technological ripple effects to historical periods like the Gilded Age and the computer boom of the 20th century, suggesting that AI could follow a similar trajectory.

---

The Complexity of Attributing Productivity Gains to Specific Factors

When questioning whether AI or earlier technological advancements like computers are the primary drivers, Goolsbee underscores the multifaceted nature of economic growth.

Austan Goolsbee [10:14]:

"Now you're there's an old he was my teacher and he was a famous economist, Bob Solow, and he used to have this phrase. He said when economists talk about the sources of growth, they always end up going down in a blaze of amateur sociology. And there is a sense in which it might be many things."

This highlights the challenge in isolating singular factors amidst a web of interconnected economic variables.

---

Conclusion: The Ongoing Quest to Understand Productivity Growth

Despite the clarity of recent productivity trends, the underlying causes remain elusive, prompting economists like Austan Goolsbee to continue their investigative efforts.

Waylon Wong [10:37]:

"So Austan Goolsbee, economic detective, remains on the case."

Adrienne Ma [10:41]:

"Sounds like economists are going to be super productive trying to figure this out. See what I did there?"

The episode concludes on a light-hearted note, emphasizing the complexity and ongoing nature of unraveling this economic mystery.

---

Production Credits

• Produced by: Cooper Katz McKim
• Engineering: Neal Rauch
• Fact-Checked by: Sierra Juarez
• Editor: Kicking Cannon
• Production Company: NPR

---

Notable Quotes with Timestamps

• Austan Goolsbee [05:51]:

  "There is a very real sense in which if productivity growth is higher, even modestly higher for a sustained period, everything is wonderful. Our wages can grow faster without inflation. The interest rate doesn't have to go up in the short run. At the end of the day, it is productivity that made us the richest major economy in the world."

• Austan Goolsbee [08:47]:

  "So AI proves to be as transformative, that could boost productivity in a lasting way."

• Austan Goolsbee [10:14]:

  "Now you're there's an old he was my teacher and he was a famous economist, Bob Solow, and he used to have this phrase. He said when economists talk about the sources of growth, they always end up going down in a blaze of amateur sociology. And there is a sense in which it might be many things."

---

Note: This summary omits all advertisements, sponsorship messages, and non-content segments to focus solely on the substantive discussions surrounding U.S. labor productivity growth.

Transcript

[NPR]

Npr.

[Adrienne Ma]

This is the Indicator from Planet Money. I'm Adrienne Ma.

[Waylon Wong]

And I'm Waylon Wong. It is jobs Friday. We've got the latest numbers from the Bureau of Labor Statistics. In May, the economy added 139,000 jobs and the unemployment rate was unchanged at 4.2%.

[Adrienne Ma]

If you're a faithful indicator listener, you know that we like to look at the BLS's what they call the Employment Situation Report every month because it's a snapshot of how everyday people are doing in the economy. But there are other ways that the BLS measures how working people are doing. And that is what we're looking at today, a data series that gets one economist particularly excited.

[Austan Goolsbee]

That's the greatest unsung series that. If you say, what should we be watching? That's what you should be watching.

[Adrienne Ma]

I would recognize that economist voice anywhere.

[Waylon Wong]

Oh, yes. Welcome back to the chat. Austan Goolsbee, president of the Federal Reserve bank of Chicago. Yes, he is back. And this unsung data series he's obsessed with is labor productivity growth. It's a measure of worker output. For the last couple of years, this number for the most part, has been increasing in a significant way. And the thing is a economists don't know exactly why.

[Adrienne Ma]

So today on the show, Austan Goolsbee takes us on a economic mystery hunt of sorts. He walks us through some of the different theories about why this number has been going up. It's the case of the perplexing productivity growth.

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[Waylon Wong]

Measure of labor productivity is output per hour. Economists use data from Gross Domestic Product reports to calculate this number.

[Adrienne Ma]

Oh, so there are not literally Bureau of Labor Statistics employees just fanning across the country counting how many widgets every factory is making.

[Waylon Wong]

Yeah, they're not like, oh, five zipper teeth today. Yeah, it's actually tallying up the value of those widgets. Or for a restaurant, it would measure sales per worker. That is how the BLS calculates productivity. Now, when we talked to Chicago Fed President Austan Goolsbee in April, he told us that patterns in the productivity data can be hard to spot.

[Austan Goolsbee]

It's like you're, you know, when your kids are growing, you can look back at markers of pencil on the doorframe, but in the moment, they just look the same as they always looked.

[Adrienne Ma]

When Austin studied those pencil marks on the doorframe of the economy, he noticed something. Productivity took a hit at the start of the pandemic, which is not surprising. And then it started rebounding in late 2022, which is maybe also not surprising.

[Austan Goolsbee]

But then it kept looking really quite good. Better than pre Covid. And now we've got two solid years where productivity growth has been well above the previous decade or two trend line. That's really where the mystery began.

[Adrienne Ma]

If you look at data from the 2010s, labor productivity grew around 1% a year. But compare that with rates that we've seen more recently, which are more like 2% a year.

[Waylon Wong]

But aren't there always twists and turns in a mystery? BLS data released yesterday show that productivity growth actually fell 1.5% in 1Q20. So we called up Austin to see what he made of this drop.

[Austan Goolsbee]

Productivity is a really noisy number, so you gotta be careful.

[Waylon Wong]

Austin said if you look at first quarter gdp, that number was a little weird. It showed a decrease because of a surge in imports ahead of tariffs. And remember, GDP numbers feed into the productivity number.

[Austan Goolsbee]

Just recognize stuff like that goes up and down a lot over a year a decade. It's, of course, much smoother. And for productivity, that's the time frame you want to be thinking about and.

[Waylon Wong]

Bottom line, Adrienne, As Austin told us in April, economists like to root for more productivity.

[Austan Goolsbee]

There is a very real sense in which if productivity growth is higher, even modestly higher for a sustained period, everything is wonderful. Our wages can grow faster without inflation. The interest rate doesn't have to go up in the short run. At the end of the day, it is productivity that made us the richest major economy in the world.

[Adrienne Ma]

Yeah. I mean the US is still a global leader in terms of productivity. So you can see why economists like Austin are so fascinated with it. So Austin walked us through four possible explanations.

[Waylon Wong]

Theory number one, more people working from home.

[Austan Goolsbee]

You got a couple of researchers going out and making the case that people can be more productive per work or per hour if they can have that flexibility.

[Waylon Wong]

When you're kind of kicking the tires on this idea, do you look at, you know, which industries are showing productivity growth? Because that seems like it is a largely people type in at their desks kind of story.

[Austan Goolsbee]

Yes. And look, you're channeling your inner economic researcher. That's exactly.

[Waylon Wong]

That's so nice of you to say.

[Austan Goolsbee]

The style. I'm glad you took that as a compliment. That's exactly.

[Waylon Wong]

Was it not intended as.

[Austan Goolsbee]

It was intended as a compliment. But not everyone would take it as such. If that is the main cause. That's just a one off. That would increase the level of productivity, but that's not a reason why the growth rate would continue.

[Adrienne Ma]

So in Austin's view, flexibility does not explain the sustained productivity growth. So let's look at theory number two, what economists call labor reallocation.

[Austan Goolsbee]

That they call it. That is exactly why you never want to hire a person with a PhD in economics to work on your marketing. Okay, this is just the idea of the great resignation. Maybe it allowed people to leave jobs that they were sick of, go into something that motivates them more that they're more suited to, and they had an explosion of productivity.

[Adrienne Ma]

But sort of like the flexibility theory, this reshuffling is also a one off event. In Austin's view. A lot of workers moved to new jobs they liked better and they stayed. They didn't keep moving around.

[Waylon Wong]

So onto theory number three, new business creation. There's been a surge in new business applications in the US starting during the pandemic.

[Austan Goolsbee]

And historically new businesses often have faster productivity growth or higher productivity. So there has been some argument maybe the economy's productivity went up because we have all these new firms. Again, I'm a little nervous that that sounds like A one time.

[Adrienne Ma]

So we're down to our last theory, and that is artificial intelligence.

[Waylon Wong]

Austin says most economists think it's still too early for the effects of AI to show up in the data scientists still, he finds AI to be an intriguing lead in this economic mystery. That's because there are historical examples of new technology leading to longer term productivity booms.

[Austan Goolsbee]

So electricity comes in. It is electricity production where there's a massive increase in productivity. Then after a little bit of time it kind of filters its way through the economy and you see a boom in productivity in the most electricity intensive industries. So aluminum gets more productive and then with another lag of a lot of years, people start building businesses around the presence of electricity and then you see the productivity continue.

[Adrienne Ma]

These technological ripple effects show up throughout history, like in the Gilded Age, which we talked about in yesterday's episode and which we'll link in the show notes. Another place you can see these ripple effects are with the introduction of computers in the 20th century. So if AI proves to be as transformative, that could boost productivity in a lasting way.

[Waylon Wong]

Is it tricky to tease out then if it could be AI or if it's something that maybe started earlier than what we think of as AI? Could you still attribute this to the computer boom that you were talking about earlier?

[Austan Goolsbee]

Now you're there's an old he was my teacher and he was a famous economist, Bob Solow, and he used to have this phrase. He said when economists talk about the sources of growth, they always end up going down in a blaze of amateur sociology. And there is a sense in which it might be many things.

[Waylon Wong]

So Austan Goolsbee, economic detective, remains on the case.

[Adrienne Ma]

Sounds like economists are going to be super productive trying to figure this out. See what I did there?

[Waylon Wong]

Does that mean we have to be more productive doing stories about it?

[Adrienne Ma]

I hope not.

[Waylon Wong]

This episode was produced by Cooper Katz McKim with engineering by Neal Rauch. It was fact checked by Sierra Juarez. Kicking Cannon is our show's editor and the indicator is a production of npr.

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[Adrienne Ma]

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