Labor Productivity Affects Global Growth

Labor productivity is a cause of concern for the global growth outlook, according to a new report from Moody’s Investors Service. The ratings agency expects global growth to increase to 3.1% this year and 3.5% next year. Global growth was at 2.7% in 2016. This could change if productivity growth does not keep pace.

“Should productivity growth remain at its 2016 pace of 1.2% or even at its average pace of 1.7% over 2011–2015, global growth in 2018 could be as low as 2.5% or 3% respectively, compared to Moody’s current expectation of 3.5%,” the agency said.

There are several reasons behind the slowing rebound rate after the financial crisis, including weak investments due to the availability of credit, business pessimism and economic uncertainty. “Long-term trends such as population aging and the slowing growth in human capital and education are also behind the decline in productivity growth,” Moody’s said.

Meanwhile, the U.S. Bureau of Labor Statistics released the country’s productivity data this week. Labor productivity in the U.S. decreased at a 0.6% annual rate in the first quarter of 2017. Economists polled by Reuters expected no change in productivity. Productivity increased 1.1% between the first quarter of 2016 and that of 2017. “Weak productivity could make it difficult to boost annual economic growth to 4% as President Donald Trump has promised,” said Reuters.

“It should be noted that productivity numbers are always volatile and were likely affected by the seasonal issues that dragged overall GDP growth down for the quarter,” said NACM Economist Chris Kuehl, Ph.D. “The problem is that productivity has been unimpressive for years now and has consistently been under the levels seen in 2011.”

– Michael Miller, editorial associate

No comments:

Post a Comment