The Stylized Facts of the United States Manufacturing Productivity Slowdown

This report investigates recent trends in productivity growth within the U.S. manufacturing sector, highlighting a significant and persistent slowdown. By evaluating compound annual growth rates, we found that growth in manufacturing fell from 3.75 per cent over 1997-2011 to -0.51 per cent over 2011-2023, the largest slowdown of any two-digit NAICS sector. Using two- and three-digit NAICS data, this report first situates manufacturing within the broader private business sector and then aims to identify the specific industries contributing most to the sector’s underperformance. The manufacturing productivity growth slowdown was broad-based, but a few industries accounted for most of the aggregate decline. Comparative analysis with peer economies highlights that the U.S. manufacturing productivity slowdown has been particularly severe by international standards. Given manufacturing’s historical importance as a driver of productivity growth, its considerable scale, and its extensive inter-industry linkages, this slowdown has had broad implications for the wider private business sector. This report explores several potential explanations, including diminishing returns to technological innovation, structural shifts across industries, reduced R&D effectiveness, and the persistent effects of the Great Recession. It also considers broader constraints such as offshoring, stagnating capital intensity, and challenges related to productivity measurement.