The iPhone, Amazon, and Uber have yet to deliver the kind of productivity boom that led to a burst of American prosperity in previous eras of technological advances. But new data suggest the latest technology boom is starting to give the economy a jolt.
Multifactor productivity grew 1% last year, the strongest gain since 2010, the first full year of the expansion, the Labor Department said Wednesday. Multifactor productivity measures the improvement in U.S. output after accounting for any additions to capital and labor. It is a rough measure of innovation—how much more companies are able to produce by coming up with better ways to use existing resources, rather than by adding more workers or machines.
Productivity—a more closely watched measure of how much U.S. workers produce per hour worked—is the biggest factor in the economy’s ability to raise Americans’ living standards. When companies can produce more with less, profits grow and workers, over the long run, benefit from lower prices, higher wages and more job opportunities.
A 1% gain is hardly a boom. Multifactor productivity grew an average 1.4% between 2000 and 2007. Despite last year’s gain, the measure has risen an average 0.4% since 2007.
Productivity has slowed considerably this century, which is the main reason many economists remain cautious about the nation’s long-term health despite the long stretch of economic growth and job gains. Economists see numerous reasons behind the slowdown, including an aging population. The country isn’t adding workers at the same clip that it was after World War II, when the economy benefited from the baby boom and the increase of female workers.
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