Productivity Measurement Analysis series – insights from Q1, 2024
The Productivity Measurement Analysis series, authored by experts in the Institute’s Productivity Lab, reports on productivity trends in the UK, United States and the Euro Area, following the reporting of national statistical agencies. More so than with most other measures, the long-term trend in productivity growth is a critical element of economic growth.
Analysis of productivity for Quarter 1, 2024
UK labour productivity shows a moderate growth by Raquel Ortega-Argilés
Preliminary estimates based on the Labour Force Survey (LFS) show that labour productivity, measured as output per hour worked, increased by 0.1% in Q1, 2024 compared with the same quarter a year ago and by 0.8% when measured as output per worker, and is now 1.7% higher than before the COVID-19 pandemic (2019 average level). When analysing the industrial contribution to productivity growth in output per hour worked for the first quarter of 2024 compared to the same quarter in the previous year, it was found that the manufacturing industry had the largest positive impact on productivity growth. Conversely, services had a negative impact on annual productivity growth.
The broad array of evidence currently emerging indicates that the economic volatility seen after the pandemic and Russian invasion of Ukraine has largely faded, but that growth remains constrained in the face of high interest rates.
US productivity growth stagnates by Martin Fleming
US nonfarm business sector labour productivity increased 0.2% in Q1 2024, the U.S. Bureau of Labor Statistics (BLS) reported on 6 June. This contrasts with robust second half 2023 improvement. While the data are seasonally adjusted, the Q1 growth slowdown follows productivity declines in Q1 2022 and Q1 2023. Both years had stronger second half growth. The long-term trend in nonfarm business sector productivity growth remains at 1.5%. Weak Q1 2024 US nonfarm business sector productivity growth adds more fuel to the growing fiery debate over long-term productivity growth and the impact of artificial intelligence.
Productivity in the nonfinancial corporate sector continues at a somewhat stronger pace than in the much broader nonfarm business sector and the smaller manufacturing sector.
Labour productivity in the Euro Area is bottoming out as economic activity improves by Klaas de Vries
After very weak growth in 2023, the start of 2024 brought better news in terms of economic activity. Labour productivity in the Euro Area, defined as real GDP per hour worked, increased modestly in the first quarter of 2024 compared to the previous quarter, according to figures released on 6 June. On a year-over-year basis, it looks like the labour productivity decline is bottoming out—at least for GDP per hour worked – with a neutral reading after six consecutive quarters of negative readings.
Inflation has moderated while pay growth is still elevated, and the resultant real income gains are boosting demand. This has helped the Euro Area to finally recover in earnest from the shocks of the previous two years. Real GDP growth ticked up in the first quarter of 2024 to 0.4%. That was an improvement from the 0.1% growth registered in the last couple of quarters. Furthermore, growth was relatively balanced across the economies sharing the Euro, with most seeing increases. Growth was particularly strong in Spain (0.7%) and Portugal (1.3%), while Germany returned to growth after weakness throughout 2023. The Netherlands was somewhat of an outlier among the larger economies, with a contraction of 0.3%. This was largely on the back of decreases in manufacturing activity, particularly related to car manufacturing and (chip) machinery fabrication.
Further information
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The Productivity Lab is The Productivity Institute’s data science centre of excellence, the “engine room” for collecting, disseminating, and producing productivity data.
