Glossary · Economy
Productivity
Productivity is how much is produced per hour of work; its growth is what lets wages and living standards rise over time.
Also called: labor productivity, output per hour, productivity growth
Output per hour, nonfarm business, to Q3 2026.
An hour of work now produces 5.48 times as much.
In plain words
A pizza shop with three cooks makes 60 pizzas an hour: 20 per cook. It buys a better oven, and the same three cooks make 75 an hour: 25 per cook. That rise from 20 to 25 is higher productivity: more output from the same work.
For the US economy, the Bureau of Labor Statistics measures output per hour worked in businesses outside farming. Since 1947 it has grown about 2.2% a year, so an hour of work now produces 5.48 times as much as then. Over the four quarters to Q3 2026 it changed by +2.1%.
In the long run it is almost the only way to get richer: an economy can only consume what it produces, and producing more per hour is what pays for higher wages without higher prices.
Example
Where the growth comes from
- A factory makes 1,000 chairs with 500 hours of work: 2 chairs an hour.
- It buys new machines (more capital per worker): 1,100 chairs in the same 500 hours.
- Workers are trained and the floor is reorganized (better skills and a better idea): 1,200 chairs in 500 hours, 2.4 chairs an hour, 20% more.
- At 2% productivity growth a year, output per hour doubles in about 35 years; at 1%, in about 70.
Economists split productivity growth into more capital, a more skilled workforce, and everything else (better technology and organization), which they call total factor productivity.
One level deeper
US productivity growth has come in waves: fast after the Second World War, much slower after 1973, a revival from the mid-1990s with computers and the internet, and a slowdown again after the mid-2000s. By decade, the fastest in the data was the 2000s (2.7% a year) and the slowest the 2010s (1.2%).
Over long periods real wages follow productivity, though not one for one. Since the 1970s typical workers’ pay has grown more slowly than output per hour, partly because more income went to profits and to the highest earners, and partly because of how prices are measured.
It is hard to measure in services: what is the output of a teacher or a doctor? Free digital services may not show up at all. Some economists think that explains part of the recent slowdown; most think it explains only a little.
Productivity growth by decade
Average yearly growth of output per hour in the US nonfarm business sector, decade by decade. A difference of one point a year compounds into a big gap over a working life.
The numbers behind the chart
| Output per hour, growth a year | |
|---|---|
| 1950s | 2.6% |
| 1960s | 2.7% |
| 1970s | 2.0% |
| 1980s | 1.5% |
| 1990s | 2.2% |
| 2000s | 2.7% |
| 2010s | 1.2% |
| 2020s so far | 2.2% |
Why it matters
It is the engine of living standards: real GDP per person can keep rising only if each hour of work produces more.
It lets wages rise without pushing up prices, which is why central banks watch it.
It shapes public budgets: faster productivity growth means more income and taxes to pay for pensions and debts.
A common mistake
Myth: Higher productivity means fewer jobs.
In fact: In one factory, maybe; across the economy, no. Output per hour has grown 5.48 times since 1947, and over about the same years the number of US payroll jobs grew 3.66 times, from 44 million to 159 million. Cheaper goods free up money to spend on new things, which need new workers.
Questions people ask
What is labor productivity?
Output divided by hours worked. The headline US measure covers the nonfarm business sector, about three quarters of GDP, and is published every quarter by the Bureau of Labor Statistics.
Why has productivity growth slowed?
Economists disagree. Candidates include fewer world-changing inventions, slower spread of new technology to most firms, weaker business investment, an aging workforce and mismeasurement of digital services.
Will AI raise productivity?
Possibly. Past general-purpose technologies such as electricity and computers took decades to show up in the numbers, because businesses had to reorganize around them. Our AI boom article follows the money going in.
Read more on BigCapital
About the numbers
- The numbers on this page are recalculated from the data every night; the sources are listed at the end of the page.
- All employees, total nonfarm: U.S. Bureau of Labor Statistics, Current Employment Statistics (establishment survey), series PAYEMS; retrieved from FRED, Federal Reserve Bank of St. Louis.
- Labor productivity: output per hour, nonfarm business: U.S. Bureau of Labor Statistics, Productivity and Costs, series OPHNFB; retrieved from FRED, Federal Reserve Bank of St. Louis.
- This page explains a term. It is not investment advice.