U.S. Productivity Rises in 2009, Despite the Recession

U.S. productivity weathered the recession well, growing 2.5 percent (in per hour terms) in 2009, The Conference Board reported today.

This blip in the prevailing downward trend in U.S. productivity was largely explained by dramatically reduced working hours that offset output decline (employment fell by 3.6 percent in 2009; hours worked per worker by 1.5 percent.) U.S. productivity growth is projected at 3 percent for 2010.

European productivity growth turned negative in 2009, falling far behind the United States. Output per hour fell 1 percent in the Euro Area, whereas U.S. productivity growth remained remarkably strong, growing 2.5 percent in 2009.

"These are unusually large differences in productivity growth between the United States and Europe," said Bart van Ark, chief economist of The Conference Board. "U.S. employers have reacted much more strongly to the recession than their European counterparts in terms of cutting jobs and hours. In 2010, both Europe and the United States will see higher productivity growth coming out of recession. However, a jobless productivity recovery is the most likely scenario in both regions."

"Most emerging markets outside Central and East Europe and Russia fared better than advanced economies on both output and productivity growth in 2009," said van Ark. "Emerging economies are becoming global competitors to be reckoned with on the basis of high productivity growth, not just because of low cost."

China's productivity growth rate (8.2 percent) was the best among emerging markets in 2009 and is projected to be 7.7 percent in 2010. "China's 2009 productivity growth is largely due to government stimulus supporting state-owned enterprises," van Ark said. "Going forward, it remains to be seen whether this can continue as support for SOEs wanes."

World productivity growth also declined in 2009 (-1 percent in terms of output per worker), putting it in negative territory for the first time in almost two decades, but it is expected to recover strongly in 2010 as both emerging and developing economies show stronger productivity performance.

The data reported today is drawn from The Conference Board Total Economy Database. Widely watched and utilized by economists and other analysts around the world, the database is available free of charge for public use. It is updated twice yearly, with analyses provided to member companies in January in The Conference Board Productivity Brief, and a more in-depth Performance research report later in the year.

Among today's key points:

The worldwide recession caused a 1-percent drop in global output per worker, taking it into negative territory for the first time in 19 years. (It was negative in 1991, but by only 0.1 percent). Global productivity growth is expected to go strongly positive again in 2010 (+2.2 percent).

Productivity growth in the Euro Area turned negative (-1 percent) following two years of decline, but is projected to recover significantly (+2 percent) in 2010. Of the -3.1 percent decline in hours worked, only -1.9 percent was due to a fall in employment; the rest was due to a 1.2-percent drop in hours per worker.

U.K. productivity (-1.9 percent) fared worse than that of the European Union or the Euro Area, primarily due to a larger contraction in output. Productivity is projected to return to positive growth of 1.7 percent in 2010. The long-term trend in U.K. labor productivity has been significantly downward since 1995, along with a weakening labor market.

The Conference Board Total Economy Database provides a comprehensive overview of growth rates of productivity, GDP, employment and hours worked for 123 economies representing 97 percent of the world's population and 99 percent of global output. It also contains estimated levels of productivity (expressed in U.S. dollars and adjusted for relative price differences), as well as the levels of GDP, employment, hours worked (for selected countries), population, and labor productivity. (Productivity per hour captures those workers who are still employed, but at reduced hours.) The Total Economy Database draws largely on such international sources as the OECD, Eurostat and the IMF, and also from the latest national accounts, labor surveys, and other employment statistics available for individual countries. New to the Total Economy Database this year is Total Factor Productivity (TFP), which accounts for such sources as improvements in workers skills, machinery and software. TFP is a more precise measure of efficiency than labor productivity.

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