A 10-year decline in global productivity growth halted last year, and is projected to show an uptick in 2017, according to the latest release of annual productivity growth rates for 123 countries by The Conference Board. The growth is largely driven by faster demand from emerging markets.
Global productivity weakness of the past few years reflects the lingering effects of the global financial crisis and the sluggishness by which new technologies have translated into faster productivity. The 2017 Productivity Brief, based on data from The Conference Board Total Economy Database, projects global productivity to improve to 1.9% in 2017, up from 1.3% in both 2016 and 2015.
“In 2016, we did not see a visible turnaround in the dismal productivity performance of the global economy of the past four years,” said Bart van Ark, Global Chief Economist of The Conference Board. “However, the good news is that we are seeing an uptick in productivity growth in 2017, which largely reflects cyclical tailwinds from stronger demand, especially in emerging markets.”
Labor productivity growth—defined as additional output per unit of labor — relates output growth to changes in employment. Most of the recent productivity improvements are driven by faster GDP growth, while the pace of employment growth lags.
In 2016, productivity improved in emerging markets, driven by stronger domestic and global demand and largely unchanged employment growth rates. Much of the improvement came from larger economies, such as China, and from stronger growth in regions such as Latin America and the Middle East that include economies which have relatively high levels of productivity.
Overall, the 2017 projection for productivity in emerging markets is strengthening significantly, though it remains well below its long-term trend.
Key findings of the report are as follows:
In Europe, faster productivity growth (to 1.1% in 2017 – and to 1% when adjusted for a rise in hours worked) has largely resulted from cyclical improvements in the economy.
In the United States, productivity growth has been slower than in Europe, while early signs of some recovery (from 0.2% in 2016 to 0.8% for the aggregate economy in 2017, and even 1% when adjusted for working hours) mainly reflect already slowing job growth.
In Japan and the UK, productivity improvements are not accompanied by strong job growth either, as both economies face tightening labor markets in 2017 as well.
Despite weakness in recent years, China’s productivity growth remains solid, perhaps even improving slightly, while employment growth has stalled.
India is experiencing one of the highest productivity growth rates among the emerging markets, despite a moderate slowdown in 2016.
Brazil’s productivity growth remained in negative territory in 2016, even though the pullback on input growth, especially employment, softened the productivity decline.
Link here for the full report.