The Mysterious Slowdown in U.S. Manufacturing Productivity
![Photo: assembly line with several men and women in blue overalls.](https://libertystreeteconomics.newyorkfed.org/wp-content/uploads/sites/2/2024/07/LSE_2024_productivity_lashkari-pearce_460.jpg?w=920)
Throughout the twentieth century, steady technological and organizational innovations, along with the accumulation of productive capital, increased labor productivity at a steady rate of around 2 percent per year. However, the past two decades have witnessed a slowdown in labor productivity, measured as value added per hour worked. This slowdown has been particularly stark in the manufacturing sector, which historically has been a leading sector in driving the productivity of the aggregate U.S. economy. What makes this slowdown particularly puzzling is the fact that manufacturing accounts for the majority of U.S. research and development (R&D) expenditure. Despite several recent studies (see, for example, Syverson [2016]), much remains to be uncovered about the nature of this slowdown. This post illustrates a key facet of the mystery: the productivity slowdown appears to be pervasive across industries and across firms of various sizes.
The Post‑Pandemic Shift in Retirement Expectations in the U.S.
![Photo: woman riding her bike by the water. Text overlay 10 Years Measuring Consumer Behavior and Expectations](https://libertystreeteconomics.newyorkfed.org/wp-content/uploads/sites/2/2024/05/LSE_2024_retirement-expectations_vanderklaauw_460a.jpg?w=920)
One of the most striking features of the labor market recovery following the pandemic recession has been the surge in quits from 2021 to mid-2023. This surge, often referred to as the Great Resignation, or the Great Reshuffle, was uncommonly large for an economic expansion. In this post, we call attention to a related labor market change that has not been previously highlighted—a persistent change in retirement expectations, with workers reporting much lower expectations of working full-time beyond ages 62 and 67. This decline is particularly notable for female workers and lower-income workers.
Many Places Still Have Not Recovered from the Pandemic Recession
![Photo: People standing in line for job & training expo](https://libertystreeteconomics.newyorkfed.org/wp-content/uploads/sites/2/2024/05/LSE_2024_regional-recovery-pandemic_deitz_460.jpg?w=920)
More than four years have passed since the onset of the pandemic, which resulted in one of the sharpest and deepest economic downturns in U.S. history. While the nation as a whole has recovered the jobs that were lost during the pandemic recession, many places have not. Indeed, job shortfalls remain in more than a quarter of the country’s metro areas, including many in the New York-Northern New Jersey region. In fact, while employment is well above pre-pandemic levels in Northern New Jersey, jobs have only recently recovered in and around New York City, and most of upstate New York—like much of the Rust Belt—still has not fully recovered and has some of the largest job shortfalls in the country.
Will the Moderation in Wage Growth Continue?
![Photo of women in an electronics Factory Worker in Blue Work Coat and Protective Glasses is Assembling Smartphones with Screwdriver. High Tech Factory Facility with more Employees in the Background.](https://libertystreeteconomics.newyorkfed.org/wp-content/uploads/sites/2/2024/03/LSE_2024_wage-inflation_audoly_460.jpg?w=920)
Wage growth has moderated notably following its post-pandemic surge, but it remains strong compared to the wage growth prevailing during the low-inflation pre-COVID years. Will the moderation continue, or will it stall? And what does it say about the current state of the labor market? In this post, we use our own measure of wage growth persistence – called Trend Wage Inflation (TWIn in short) – to look at these questions. Our main finding is that, after a rapid decline from 7 percent at its peak in late 2021 to around 5 percent in early 2023, TWin has changed little in recent months, indicating that the moderation in nominal wage growth may have stalled. We also show that our measure of trend wage inflation and labor market tightness comove very closely. Hence, the recent behavior of TWIn is consistent with a still-tight labor market.
The Power of Proximity: How Working beside Colleagues Affects Training and Productivity
![](https://libertystreeteconomics.newyorkfed.org/wp-content/uploads/sites/2/2024/01/LSE_2024_power-of-prox_emanuel_460_39f7ac.jpg?w=920)
Firms remain divided about the value of the office for “office” workers. Some firms think that their employees are more productive when working from home. Others believe that the office is a key place for investing in workers’ skills. In this post, which is based on a recent working paper, we examine whether both sides could be right: Could working in the office facilitate investments in workers’ skills for tomorrow that diminish productivity today?
Businesses Want Remote Work, Just Not as Much
![Photo of African American woman sitting at their desk looking at two screens; one screen has images of many people on a remote call, the other screen has a spreadsheet open.](https://libertystreeteconomics.newyorkfed.org/wp-content/uploads/sites/2/2023/08/LSE_2023_remote-work_deitz_460.jpg?w=920)
The enormous increase in remote work that occurred during the pandemic was a response to a temporary public health crisis. Now that the pandemic has passed, just how much remote work will persist and how much are businesses comfortable with? Results from our August regional business surveys indicate that more than 20 percent of all service work and 4 percent of all manufacturing work is currently being done remotely, nearly identical to what was reported a year ago, and this amount of remote work is expected to persist in the year ahead. However, on average, service sector businesses would prefer that about 15 percent of work be done remotely. Indeed, nearly a quarter of service firms have increased requirements for employees to work on-site over the past year and about one in six plan to make further adjustments toward in-person work next year. Ultimately, the degree and persistence of remote work will largely depend on the tightness of the labor market, as businesses report that while remote work does have its downsides, it has been particularly helpful for attracting and retaining workers.
Is Work‑from‑Home Working?
![Decorative image: man working on laptop at home with dog sitting next to him](https://libertystreeteconomics.newyorkfed.org/wp-content/uploads/sites/2/2023/06/LSE_2023_working-remotely_emanuel_460.jpg?w=920)
Though some offices have re-opened as the pandemic has receded, many workers have continued to work from home. Recent survey data suggest that workers would like more remote-work days than firms want to supply—a pattern that was evident even before the pandemic. Why have firms been so reluctant to offer remote work? And what will the recent seismic shift in remote work mean for the economy?