Productivity Growth Slowed in First Quarter 2024

By at 2 May, 2024, 1:53 pm

by Raymond J. Keating – 

The good news in the latest labor productivity report from the U.S. Bureau of Labor Statistics (BLS) is that nonfarm business sector labor productivity grew in the first quarter of 2024. However, the rate of growth slowed markedly from strong growth in the previous three quarters in 2023.

At a seasonally adjusted annual rate, productivity grew by 0.3 percent in the first quarter. That compared to 3.5 percent in the fourth quarter 2023, 4.6 percent in the third quarter, and 3.3 percent second quarter. Although for all of 2023 compared to 2022, productivity growth came in at 1.4 percent.

The key with this measure of productivity is that we want to see positive growth in both economic output and hours worked, with output running ahead of hours worked. That was the case in the first quarter, with output up by 1.3 percent in the first quarter and hours grew by 1.0 percent.

To put this in perspective, productivity growth has averaged 2.1 percent since 1950. In terms of annual readings, and outside of the distortions of the pandemic and the Great Recession, that mark has only been hit once (in 2019) since 2006.

Finally, productivity matters because increased productivity is good news for both business owners and employees, as increased productivity generates higher profits and higher worker earnings. Productivity growth is a win-win-win for businesses, workers and the economy.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist, The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist and The Weekly Economist III: Another 52 Quick Reads to Help You Think Like an Economist.


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