Contributions To Output Growth
Using the growth accounting identities, the nation's output growth can be decomposed into the contributions of labor input, capital services, and multifactor productivity growth. In the most recent business cycle (2007-2018) the deceleration of the nation's output growth was mainly driven by the deceleration in MFP growth in addition to a modest deceleration of industry’s use of capital services. The charts that follow illustrate the drivers of the economic slowdown in output growth over the last two business cycles by examining the contributions of 8 aggregate sectors that encompass the private business economy.
The charts that follow illustrate the drivers of the economic slowdown in output growth over the last three business cycles by examining the contributions of 8 aggregate sectors that encompass the private business economy.
Data For Charts
See the data presented in these charts.
The contributions of multifactor productivity growth to private business output growth has declined from 1.14 percentage points in 2000-2007 to 0.24 percentage points in 2007-2018. The contributions from the manufacturing sector’s MFP growth significantly changed when it went from being the largest contributor to the nation’s MFP growth in the 2000-2007 business cycle to being a drag on MFP growth in the 2007-2018 business cycle.
Manufacturing MFP growth contributed 0.57 percentage points to private business output growth in the 2000-2007 business cycle, with the computers and electronic products industry making up almost half of that growth (0.24). However, in the current 2007-2018 business cycle, computer and electronic products MFP growth has slowed substantially and now only contributes 0.07 percentage points to private business output growth. Additionally, the MFP growth in the chemical products industry has been in decline in the current business cycle and contributed -0.9 percentage points to private business output growth in 2007-2018. See the data on all 60 industries.
Similarly, from 1990-2000, MFP growth in the trade sector added strong positive contributions to private business output growth (0.51), however more recently, the contributions of trade MFP are flat. Together, the decline in MFP for manufacturing and trade explain the entirety of the nation's MFP slowdown.
During the 2000-2007 business cycle, the contribution of labor input to private business output growth declined over a full percentage point from 1.34 to just 0.23 percentage points. This substantial decline was due to job losses and hours declines in the manufacturing and service sectors, illustrating why this time period has sometimes been referred to as the "jobless recovery." The computers and electronic products industry’s labor input growth had the most significant decline among the detailed industries within the manufacturing sector, with its labor input growth contribution declining from 0.01 percentage points in 1990-2000 to a -0.06 percentage points in 2000-2007. See the data on all 60 industries. For services, the decline in labor input contributions are most notable in the miscellaneous professional, scientific, and technical services and administrative and support services industries with their contributions declining by 0.13 and 0.09 percentage points, respectively.
Labor's contribution began to rebound in the most recent business cycle as a result of manufacturing and information. The computers and electronic products industry and data processing, internet publishing, and other information services industry were less of a drag on private business output growth. However, the services sector has yet to see a full recovery from the 2000-2007 decline and finance, insurance, and real estate sector has continued to experience declining labor input contributions.
The capital services contribution to output growth gradually declined over the three business cycles, declining from 1.38 percentage points in 1990-2000 to 0.80 percentage points in the current business cycle. The decline in the contribution of capital from the finance, insurance, and real estate (FIRE) sector is the main driver – as the fall out of the financial crisis and housing collapse during the 2007-2009 period clearly impacted this sector.
The banking and rental and leasing services industries are the largest contributors to capital growth in the FIRE sector and both have experienced substantial decline in the last two business cycles. The contribution of banking capital growth to private business output growth has declined by over two thirds from 0.16 percentage points in 1990-2000 to just 0.05 percentage points in 2007-2018. Rental and leasing services also experienced a similar decline of 0.16 percentage points from the 1990-2000 business cycle to 0.03 percentage points during the most recent (2007 -2018) business cycle.
Despite the overall gradual decline in capital services contribution to output growth, the contribution of capital in the information sector is a significant source of growth in the current business cycle. This is a result of a rise in the data processing, internet publishing, and other information services and broadcasting and telecommunications industries. In the 1990-2000 business cycle these two industries had a combined contribution of 0.15 percentage points but now in the current business cycle these two industries have a combined contribution of 0.20 percentage points, which accounts for a quarter of all private business capital growth in 2007-2018. See the data on all 60 industries.
Contributions of factors of production are calculated as the natural log change in the factor index weighted by its share of Private Business value added growth.
Note: The 8 sectors' data in this file are calculated using a KLEMS growth accounting framework. The source of sectoral output differs among industries and sectors. Output for manufacturing industries, mining and utilities, air transportation, information, and food and beverage industries constructed primarily using data from the Economic Censuses and Annual Surveys of the U.S. Census Bureau together with data on price changes from BLS. Other data sources include: the Energy Information Administration, U.S. Department of Energy; and the Bureau of Transportation Statistics, U.S. Department of Transportation. For all other nonmanufacturing industries, sectoral output is based on indexes of real quantity and cost measures from the Bureau of Economic Analysis (BEA). Due to the different methods of measuring output growth through the use of natural logs, contributions of each factor will not sum directly to the factor growth of the private business sector.
Data in this file are consistent with the data released on January 28, 2020.
For further information, contact the Division of Major Sector Productivity, Office of Productivity and Technology(email@example.com). Bureau of Labor Statistics, U.S. Department of Labor, Washington D.C., 20212, Telephone: (202) 691-5606.
Last Modified Date: January 28, 2020