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SOURCE The Conference Board
After Years of Decline, Performance May Turn Around in 2014
NEW YORK, Jan. 14, 2014 /PRNewswire/ -- Worldwide productivity growth weakened for the third straight year in 2013, according to a new report from The Conference Board, but the decline moderated significantly. The 2014 Productivity Brief, based on data from The Conference Board Total Economy Database™, reports that global labor productivity (output per person employed) grew by 1.7 percent in 2013, down from 1.8 percent in 2012, 2.6 percent in 2011, and 3.9 percent in 2010. Since the emergence of large developing markets like China and India in the early 1990s, productivity growth has rarely fallen below 2 percent, except during the 2001–2 and 2008–9 recessions.
Productivity Stabilizes in Mature Economies, Slows Further Elsewhere
"The worldwide productivity slowdown moderated in 2013," said The Conference Board Chief Economist Bart van Ark, "largely due to the stabilization of productivity growth rates in mature economies. Nevertheless, productivity growth rates for most countries remained very low in 2013."
Labor productivity growth relates output (or GDP) growth to the changes in numbers of persons employed or total hours worked. Among the advanced economies, growth in output per person employed in the United States held steady at 0.9 percent in 2013, while output per hour grew at 0.8 percent, up from 0.7 in 2012. Europe even saw gains in output per person employed - from 0.1 percent growth in 2012 to 0.5 percent in 2013 (or 0.4 percent in the Euro Area, up from -0.1) - as the output contraction due to the recession abated. But output per hour in the Euro Area fell slightly, from 0.7 percent in 2012 to 0.6 percent in 2013, as declines in hours worked per person eased.
While their productivity growth rates generally remain much higher than mature economies', emerging and developing economies saw productivity growth continue to decelerate in 2013, in the wake of weaker performance in large markets, including China, India, Brazil, and Mexico. Overall, labor productivity growth in emerging and developing economies slowed from 3.7 percent in 2012 to 3.3 percent in 2013.
"Emerging markets, and especially China, account for the bulk of world's productivity growth," said Abdul Erumban, senior economist at The Conference Board and co-author of the report. "But the years of rapid, easy improvement appear to be over. Since these countries remain significantly less productive than mature economies in U.S. dollar terms, the ongoing shift of economic activity away from the latter adds to the global productivity slowdown."
Inefficient use of resources remains major concern
The report also uses a second, more sophisticated measure called total factor productivity that accounts for the productivity of labor and capital inputs together. In 2013, total factor productivity dropped below zero for the global economy. "This indicates stalling efficiency in the optimal allocation and use of resources," said Erumban. "While in part the result of slowing global demand in recent years, the drop in productive use of resources is also related to a combination of market rigidities and stagnating innovation in those economies."
Productivity projected to improve in 2014
At 2.3 percent globally, the Productivity Brief projects labor productivity growth to improve fairly substantially in 2014 after three years of declines. "The overwhelming driver in this year's productivity gains will be an uptick in output growth," said van Ark. "This reflects a pro-cyclical effect from recovery in the mature economies, though developing economies will also contribute."
The U.S. is likely to be the greatest contributor, with growth in output per hour expected to double to 1.8 percent in 2014, on the basis of flexible markets capable of quickly responding to strengthened demand. Japan will contribute to a lesser extent, with productivity growth rising from 0.8 to 1.2 percent. The Euro Area will slowly emerge from recession in 2014, but labor-market lag will keep growth in output per hour steady at 0.6 percent. Within Europe, some discrepancies will widen as others shrink: Productivity growth in Germany will rise to 1.2 percent, while holding roughly steady at 0.4 percent in both France and the U.K.
Productivity growth is also expected to improve in emerging and developing economies, but a return to the past decade's growth rates (nearly double today's) seems out of the question. While China's high productivity growth should decline further - to 6.7 percent - Brazil, India, Russia, and Mexico are all projected to improve slightly. Nevertheless, the vast productivity gains achieved since the 1990s in many of these countries will leave further improvements harder to come by.
2013 Highlights: Productivity Growth Stabilizes in Mature Economies
In the advanced economies as a whole, output growth and labor market performance averaged out in 2013 to keep productivity growth steady. But important regional differences were apparent.
2013 Highlights: Slowdown Continues in Developing and Emerging Economies
Stagnant gains in the rich countries once offered an opening for other economies to rapidly make up productivity gulfs that remain yawning in absolute terms. (Output per person employed in China, Brazil, and India remains just 17, 17, and 8 percent of U.S. levels, respectively.) In 2013, however, emerging and developing economies drove the overall slowdown.
The data for the 2014 Productivity Brief is drawn from The Conference Board Total Economy Database™, which provides a comprehensive overview of growth rates of productivity, GDP, and employment for 123 economies representing 97 percent of the world's population and 99 percent of global output. The results from the current report align well with the weakening of productivity in manufacturing sectors across many advanced economies, as published last December as part of The Conference Board International Labor Comparisons Program.
See 2014 Productivity Brief: Key Findings for additional data and detailed analysis on individual countries and regions at http://www.conference-board.org/data/economydatabase/
About The Conference Board
The Conference Board is a global, independent business membership and research association working in the public interest. Our mission is unique: To provide the world's leading organizations with the practical knowledge they need to improve their performance and better serve society. The Conference Board is a non-advocacy, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States. www.conference-board.org
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