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December, 1986, Vol. 109, No. 12
U.S. productivity growth since 1982:
the post-recession experience
Productivity in the business sector has grown at an average annual rate of 2.3 percent since 1947.1 Growth was more rapid before 1973 (3.0 percent) than after (0.9 percent), but throughout the postwar period, the business cycle has had pronounced effects on productivity growth in the business, nonfarm business, and manufacturing sectors.
There have been eight business cycle troughs since the end of World War II, the most recent of which occurred in the fourth quarter of 1982.2 (See exhibit 1.) The business cycle exerts an accelerating influence on productivity growth during recoveries and retards it during contractions. Since the 1982 trough, the BLS has analyzed movements in labor productivityoutput per hour of all personsfor purposes of comparing this recovery with similar periods in the past.
The cycle's effect on productivity is often explained in terms of the fixed nature of some inputs in the short run. Because the stocks of capital plant and equipment and the number of available skilled employees are not instantaneously adjustable, they remain to some extent fixed over the course of the cycle. Thus, when product demand increases after a trough, firms are able to increase output more rapidly than capital and labor inputs, thereby inducing a swift rise in productivity. During a contraction the opposite occurs, giving rise to a procyclical pattern in productivity.
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1The BLS labor productivity measures use labor input statistics derived primarily from two monthly BLS survey. Output and compensation measures are based on quarterly data prepared by the Bureau of Economic Analysis, U.S. Department of Commerce, as part of the National Income and Product Accounts. For the most recent quarters, the manufacturing output measure reflects movements in the monthly index of industrial production for durable and nondurable manufactures prepared by the Board of Governors of the Federal Reserve System. Further information on the computation of BLS productivity and cost measures can be found in Chapter 13 of the BLS Handbook of Methods, Bulletin 2134-1 (Bureau of Labor Statistics, 1982).
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