Is High Productivity Growth Returning?
US productivity may be on a higher growth trajectory than previous estimates, according to a new report from the Cleveland Fed.
A model developed by researchers from the Cleveland Fed and Yeshiva University estimates that there is a 41 percent chance that the economy has entered a period of higher productivity growth, based on data through November 2024.
That estimated probability was running below 5 percent until the recent release of new and revised data points related to labor productivity, consumption and real wages.
The higher estimated probability lends some support to predictions that the US has entered a sustained phase of rapid technological advancement based on recent increases in productivity growth, stock market performance, and advances in artificial intelligence.
But the authors recommend caution. They argue that some recent gains may be due to supply chain recovery and other transitory factors. They also note that “the model still ascribes a 59 percent probability that the trend growth rate remains low.”
“Although the model has a good track record at detecting changes in trend growth relatively quickly, it will require at least one, and probably several, more quarters of data to reach a more unambiguous conclusion,” they write.
Read the Economic Commentary: Is High Productivity Growth Returning?
Federal Reserve Bank of Cleveland
The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.
The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.
Media contact
Chuck Soder, chuck.soder@clev.frb.org, 216.672.2798
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Is High Productivity Growth Returning?
Economists find preliminary evidence that productivity may be on a higher growth trajectory, contributing to a faster pace of growth for the economy.