John Lewis

How poor has the past decade of productivity growth been by historical standards? Exceptionally.

To investigate this I take Total Factor Productivity data from the Bank’s Millennium of Macroeconomic Data dataset and add on my estimate of 2017 growth (0.14%)

From 2007, 10-year average productivity growth was negative for the first time in almost a century. Overall, it was the worst decade since the late 18th century.

I then compare productivity performance after previous “big dips” in TFP growth: Defined here as two consecutive years of negative TFP growth over which the total fall was at least 2%. I identify 10 previous episodes since 1760.

For the first few years, the post-2007 dip (red) looks roughly average. The relative weakness only really emerges after about 3-4 years.

A decade after the big dips in the 19th century (green), productivity on average recovered to a level 3% higher than before; and in the 20th century (mauve) to about 12% higher.

10-year productivity growth averaged 0.7% in the 19th century and 1.4% in the 20th. So after 20th century productivity dips, the economy recovered (on average) almost all the “lost ground” relative to the century average, and about half the ground in the 19th. By 2017 however, productivity had barely grown from its post-crisis trough.

Productivity growth was worse after the 18th century episodes (blue), but in that century average productivity growth was around zero.

Whatever the cause, productivity growth over the past decade has been remarkably poor by most historical standards.

John Lewis works in the Bank’s Research Hub.

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