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The Mysterious Slowdown in U.S. Manufacturing Productivity

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Abstract

Throughout the twentieth century, steady technological and organizational innovations, along with the accumulation of productive capital, increased labor productivity at a steady rate of around 2 percent per year. However, the past two decades have witnessed a slowdown in labor productivity, measured as value added per hour worked. This slowdown has been particularly stark in the manufacturing sector, which historically has been a leading sector in driving the productivity of the aggregate U.S. economy. What makes this slowdown particularly puzzling is the fact that manufacturing accounts for the majority of U.S. research and development (R&D) expenditure. Despite several recent studies (see, for example, Syverson [2016]), much remains to be uncovered about the nature of this slowdown. This post illustrates a key facet of the mystery: the productivity slowdown appears to be pervasive across industries and across firms of various sizes.

Suggested Citation

  • Danial Lashkari & Jeremy Pearce, 2024. "The Mysterious Slowdown in U.S. Manufacturing Productivity," Liberty Street Economics 20240711, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:98544
    Note: Editor’s Note: A revision of this post states the BLS labor productivity as sectoral output per worker. An earlier version had this as value added per worker. (November 12, 2024)
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    File URL: https://libertystreeteconomics.newyorkfed.org/2024/07/the-mysterious-slowdown-in-u-s-manufacturing-productivity/
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    Cited by:

    1. Brandt, Loren & Van Biesebroeck, Johannes & Wang, Luhang & Zhang, Yifan, 2026. "Where has all the dynamism gone? Productivity growth in China’s manufacturing sector, 1998–2013," Journal of Development Economics, Elsevier, vol. 181(C).
    2. Danial Lashkari & Jeremy Pearce, 2026. "The Anatomy of the U.S. Manufacturing Productivity Slowdown: Evidence from Firms and Industries," International Productivity Monitor, Centre for the Study of Living Standards, vol. 50, pages 79-98, Spring.
    3. Ritisha Chittoor & Paul Pietraru & Andrew Sharpe, 2025. "The Stylized Facts of the United States Manufacturing Productivity Slowdown," CSLS Research Reports 2025-06, Centre for the Study of Living Standards.

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    Keywords

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    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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