What is up with the gdp-less recovery?
That is what people are calling it, although I would not use that term. Jon Hilsenrath has the best overview I have seen, here is one excerpt:
Robert Gordon, a Northwestern University professor who tracks productivity closely, says he sees “clear signs everywhere” that a productivity slowdown is happening. Last year, productivity—measured as the output of workers for every hour they work—grew just 0.4% and has grown at a 0.9% annual rate over the past seven quarters. Productivity did spurt higher in 2009—during this stretch of fear-induced firing—but over a longer stretch it shows additional signs of slowing. Worker productivity has grown at an annual rate of 1.7% since 2004, down from 2.6% growth in the decade before that.
Mr. Gordon agrees with Ms. Romer’s overfiring story. But he says the longer-run threat to productivity shouldn’t be overlooked. “The productivity numbers have been dismal,” he says. That is an explanation this fragile economy can do without and that policy makers shouldn’t ignore.
I don’t myself see an additional short-run fall in productivity (I don’t much trust the short-run statistics in any case), though of course I have been a productivity pessimist more generally.
First and foremost, I see the very latest data as evidence for the Garett Jones hypothesis. Employers are going back to the idea of investing in workers who build up the future of the company, but who may not produce much output now.
Second, higher exports and moderating health care costs (the latter over the last two years) mean that “real gdp” is higher than traditionally measured gdp; see for instance Matt’s remarks. This supports Michael Mandel’s view about the importance of offshoring and, presumably, reshoring, to the extent that is going on. In general we undermeasure the gdp gains of successful export nations, because their outputs tend to have lower percentages of rent-seeking expenditures and more real stuff of value.
Karl Smith has interesting posts on related questions. Scott Sumner wrote an early and important post on the same topic. His bottom line was this:
So what are the likely explanations?
1. Trend growth really is slowing somewhat.
2. People are leaving the labor force.
3. RGDP data is measuring “payroll GDP,” not household GDP