This is the most important - and best - news I've heard today:
U.S. productivity began to grow quickly again in the late 1990's, and there now are enough data to suggest that this change is for real. Between 1995 and 2004, U.S. output per worker grew at a 2.9% annual rate, even faster than the impressive pre-1973 pace. It's hard to attribute this to a change in any of those factors thought to have contributed to the slowdown in the seventies. Instead, the good news seems to be the result of a new set of favorable developments, chief among which is the way that computers and information technology have changed so much about the American workplace.Whatever the explanation for the productivity gains of the last decade, the above graph displays every indication that this welcome development is continuing. Most recently, the Bureau of Labor Statistics reported productivity gains at a 3.2% annual rate for the first quarter and 2.2% annual rate for the second quarter of 2005.
How important is this?
There will always be some pessimists who think that productivity growth is a bad thing, reasoning that if one person can do the work of two, the unnecessary second worker will become unemployed. The record of history on that hypothesis is extremely clear, however. U.S. workers today produce more than three times as much per hour compared with their counterparts 50 years ago, and even so, the unemployment rate today is the same as it was in 1950. Instead of putting people out of work, what productivity growth has always meant in practice is a rising standard of living for everyone. No other statistic may be as important for determining long-run economic welfare as productivity.
But it still isn't front page news in most newspapers. Not just because bad news makes for better sales, but good growth argues against politics and ideology in general. How can a politician promise a scheme to improve the economy when the economy is running along just fine?
