When planning the Great American Road Trip, you may wish to visit a big city in California or Illinois, explore the great outdoors in Washington, discover our nation's past in Pennsylvania, or just relax on a beach in Georgia. There is no shortage of options for making your next trip the best one yet!
Just as each state has something different for everyone to enjoy, differences emerge in labor productivity trends among the 50 states and the District of Columbia.
This Spotlight covers some short- and long-term state-level trends in labor productivity, output, hours worked, and labor compensation.
The national labor productivity growth rate from 2007 to 2021 for the private nonfarm sector was 1.4 percent per year. Output grew 1.7 percent while hours worked grew 0.3 percent per year.
The four census regions mirror the national trend of output growing faster than hours worked. Hours grew more noticeably in the West and South than in the Northeast and Midwest.
North Dakota had the highest long-term productivity growth rate at 3.4 percent, spurred on by the shale oil boom. Washington followed at 2.7 percent, supported by fast-paced growth in the information, communication, and technology industries. Both states experienced growth in output that exceeded growth in hours worked. Louisiana and Wyoming, on the other hand, saw the lowest long-term labor productivity growth rates, declining by 0.1 and 0.2 percent respectively. For both states, output declined at a faster pace than hours worked, largely on account of shrinking mining, quarrying, and oil and gas extraction industries.
A state's labor productivity growth rate, along with its share of national output, affects how much a state contributes to national labor productivity. For example, California alone contributed over one-quarter of the nation’s labor productivity growth. Each of these states were among the largest state economies in terms of real Gross Domestic Product. Only Florida had a labor productivity growth rate of less than 1.0 percent. All had positive output growth, and only Illinois saw a decrease in hours worked (0.2 percent).
Through the COVID-19 pandemic, six states—Colorado, New Mexico, Texas, Wisconsin, Georgia, and Florida—saw annual labor productivity growth slow down year-to-year between 2019 and 2021. All six of these states saw output fall in 2020, only to rebound in 2021. They also saw hours drop by 6.0 to 8.0 percent in 2020, though the gains in 2021 ranged from 3.4 percent in New Mexico to 9.1 percent in Florida.
Washington, New Hampshire, Minnesota, Missouri, North Carolina, Indiana, and Montana all saw accelerating rates of labor productivity growth from 2019 through 2021. The productivity growth experienced in 2020 resulted from declines in output being outpaced by historic declines in hours worked. For example, in New Hampshire in 2020, hours fell twice as fast (at 6.6 percent) as output. The productivity bumps in 2021 were fueled by output growing faster than hours.
When labor productivity grows faster than real hourly labor compensation, this is often referred to as the productivity–compensation gap. Nationally, labor productivity grew slightly faster than compensation from 2007 to 2021.
The gap varied greatly at the state level. North Dakota and Oregon had the highest gap among 26 states where labor productivity outpaced compensation. Meanwhile, 18 states and the District of Columbia saw labor productivity lag compensation. The biggest of these lags were in Alaska and Wyoming. Productivity and compensation grew at roughly the same rates in 6 states: Hawaii, Indiana, New Hampshire, Rhode Island, South Dakota, and Utah.
Arizona, Iowa, and Michigan were the only states where labor productivity, output, and hours all declined during the 2007–09 recession. These states also experienced declines in output and hours in the brief recession at the beginning of the COVID-19 pandemic. However, these recessions were different for the three states. Hours declined faster than output in 2020 and as a result, each of these states experienced positive labor productivity growth during the pandemic.
Neil Chakraborti is an economist in the Office of Productivity and Technology, U.S. Bureau of Labor Statistics. For questions about this Spotlight, please email email@example.com.
The data presented in this Spotlight on Statistics are from Bureau of Labor Statistics annual release of state-level productivity data. Check out our highlights analysis page and learn more about how these measures were created in the Monthly Labor Review article.
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Labor productivity growth compares the amount of output with the amount of labor used to produce that output. The BLS state-level labor productivity measures tell us how productive the private nonfarm sector is in each state. This differs from the nonfarm business sector used in our national measures. Specifically, the private nonfarm sector, which covered about 80 percent of national gross domestic product (GDP) in 2021, adds nonprofit institutions serving households to the nonfarm business sector but removes government enterprises. This difference in coverage mostly reflects the available data at the state level versus the national level.