Will Fast Productivity Growth Persist?

Strong productivity growth is essential for improving living standards and can have an important impact on economic policy, yet economists are far from being experts at predicting when the trend of productivity growth might shift. In the 1960s, productivity growth boomed, growing at an average annual rate of 2%. It weakened in the early 1970s, and for the next two decades or so averaged an annual growth rate of only about 1%. Then, in the mid-1990s, productivity growth boomed again, averaging about a 3 % annual rate from the last quarter of 1995 through the middle of 2004. These shifts were not predicted and were generally not widely recognized until years after they occurred. Considering that, since the middle of 2004, productivity growth has averaged only about 1 % per year, it may be time to ask whether this is just a "pause " in the boom that started in the mid-1990s or a shift back to the growth rates seen in the 1970s and 1980s. This Economic Letter begins to answer this question by focusing on the factors that underlay the most recent productivity boom and what they may portend for the future. Information and communications technology and the productivity surge Technological innovation is often associated with productivity booms. The most obvious such innovations in recent decades have been in the production of information and communication