On the heels of July’s jobs report, which crushed expectations, the positive news was tempered a bit after U.S. worker productivity dropped for the third straight quarter. Economists had predicted that the productivity rate would improve modestly; instead it fell by 0.5 percent in what Reuters characterized as “the fastest year-on-year pace of decline in three years.” The drop extended an ongoing slide in worker productivity—the longest such dip since 1979.
The worker productivity rate is gauged by the output of goods and services produced for each hour worked. Ultimately, a decrease in that rate suggests that Americans are working more to create less. When held against more uplifting recent economic news, including the 500,000 jobs created in the past two months alone and a perking-up of wages, lower efficiency could have a surprising bite, potentially lowering long-term income and living standards, as well as encouraging the Federal Reserve to keep interest rates low.
So what gives? Well, according to one economist, it has little to do with social-media-inspired slacking off and more to do with workers having outgrown existing technology. “We have an $18 trillion economy,” explains Robert Gordon of Northwestern University, whose book The Rise and Fall of American Growth came out earlier this year. “Most of it is operating by the same business methods and procedures that have been in place for at least 10 years.”