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.