Productivity: what is it and why do we care about it?

Economists, business analysts, and policymakers have all focused considerable attention on U.S. productivity growth in recent years. This paper presents a broad overview of productivity--both labor and total factor--and discusses why it is such an important topic. We begin with the official U.S. productivity statistics prepared by the U.S. Bureau of Labor Statistics and discuss several stylized facts. We show how productivity relates to critically important variables like long-run growth, living standards, and inflation. We then describe the proximate factors that determine labor productivity using a standard growth accounting framework. Finally, we outline a series of unresolved productivity issues that have direct implications for the future of the U.S. economy.