The Continuing Decline of US Productivity

Two charts for the history books today… let’s get right to ’em:

US Worker Productivity

Worker productivity fell at a 0.9% annual clip from the first quarter this year to the second, the government announced yesterday. Thus, we’ve found an end of an incredible boom for this D-list data point. Companies have been asking more and more out of fewer employees for the last three years, and the threat of joining the 14.6 million “officially” unemployed has compelled workers to comply.

Now, for one reason or another, we’re collectively working less than we did last quarter (if, we presume, the government’s numbers add up.)

So why are we less productive?

Either America has found a temporary peak of human productivity, and without greater technology, greater incentive to work harder or more Americans in the work force, productivity growth is no longer possible…


There’s just no reason to work so hard. In other words, demand for our products and services is less than our current productivity rate.

Which is it? We promised you two nice charts… Here’s the other:

Change in Capital Stock

Capital stock is the total inflation adjusted value of all “business equipment” in the US. That’s machines, robots, vehicles, tools, software, computers, pencils, paper…the whole shebang. For the first time since World War II, US capital stock is contracting. Meaning, employers are not reinvesting in their equipment. More machines are left broken or outdated than are being replaced or upgraded.

Employers likely underinvested in capital stock during the darkest days of the credit crisis. But why aren’t they catching up now? Perhaps worker productivity is down – along with capital stock – because there’s simply not enough business to warrant investment…either in people or equipment.

Ian Mathias
for The Daily Reckoning