U.S. Productivity Now Grows Faster Than Jobs. What Changed?

Productivity up, not jobs. I commented a number of years ago that there will not be a job recovery because of technology. Glad that this has now been observed. Aivars Lode

Some economists call it the “great decoupling.”

For decades, U.S. productivity and total employment rose in lockstep. From 1953 to 1999, average annual growth in productivity was 2.1%, exactly the same as growth in jobs. As the U.S. grew richer and its workers generated more output with the aid of better machines, it created a correspondingly healthy number of new jobs.

But at the turn of the century, something changed. Since 1999, productivity growth kept rolling along at 2.1%–but job growth has slumped to an average of 0.5%. Part of the problem can be traced to the last recession, which hit the job market hard and was followed by an extremely slow recovery.

Beyond that, economists see two other longer-lasting forces at work: globalization and technological advances. The offshoring of work has helped make U.S. businesses more efficient, while new machines allow the remaining U.S. workers to produce more with less.

“Technological progress has been a big cause—and my prediction for the future is that it will be an even bigger force going forward,” says Andrew McAfee, a management professor at the Massachusetts Institute of Technology’s business school who studies the trend. 

Advanced automation keeps pushing up output, he says, “but there’s less and less demand for good old-fashioned human labor.”

Mr. McAfee notes there’s been a similar decoupling in recent years between productivity and wage growth.

Mr. McAfee co-authored a book about the impact of automation on the job market with fellow MIT professor Erik Brynjolfsson, entitled “Race Against the Machine.”