The U.S. productivity slowdown: an economy-wide and industry-level analysis

Numerous researchers have attempted to produce timeseries data that measure state-level productivity growth.In most cases, they have used employment for the labor input rather than hours worked.[1]Hours worked, however, are preferred for productivity measurement because they more accurately capture the time available for production.[2] In addition, hours worked data are used for BLS national productivity estimates.Using data from its establishment survey, the Current Employment Statistics (CES), in 2007, BLS began producing a state-level average weekly hours series for all employees, making an output-per-hour-worked series possible.[3]In June 2019, BLS published for the first time an experimental state-level labor productivity data series, measured as output per hour worked, for the private nonfarm sector.[4]BLS also published measures of state-level output, hours, unit labor costs, hourly compensation, and real hourly compensation.These new annual measures cover all 50 states and the District of Columbia from 2007 to 2017.When the underlying state outputand hours data are aggregated to produce an aggregate labor productivity measure, the resulting sum-of-states estimates closely track the BLS official measures of productivity for the nonfarm business sector, although the sectoral coverage and the hours methodology used to produce the estimates differ somewhat.Thus, we can infer the amount the states contribute to national productivity growth.This article first discusses the data sources and methodology used to construct these new state-level estimates and then presents some preliminary findings.Over the current business cycle (2007-17), nonfarm business sector labor productivity grew an average of 1.3 percent annually.However, these new measures show that productivity growth rates varied substantially across states.For example, average annual productivity growth ranged from 3.1 percent in North Dakota to -0.7 percent in Louisiana.[5] In the last section, we explore several potential uses of these new state-level data.We examine the contribution of states to national and regional productivity estimates, the growing compensation-productivity gap, the relationship between productivity growth and the share of output in the information and communications technology (ICT) producing sector, and whether state-level productivity levels are converging.