Growth and Production How Fast Will Labor Productivity Grow in the Long Run?

Labor productivity in the nonfarm business sector grew rapidly in the second half of 2013, reaching an average 2.63 percent annual rate. Th is was the fastest two-quarter pace since the boost of produc-tivity growth associated with the end of the Great Recession and the beginning of the recovery. Mean-while, labor compensation per hour grew much more slowly over the same period, at an average 1.5 percent annual rate. Th e combination of fast productivity growth and moderate labor compensa-tion growth reduced unit labor costs—the average labor compensation for the production of one unit of output. Such a fast pace of productivity will not last long though. Productivity growth is very variable in th