U.S. Productivity Sees Worst Plunge Since 1974

In 2022, U.S. workers’ productivity saw its greatest annual decline in nearly 50 years.

Nonfarm labor productivity—a measure that compares the output of goods and services to the number of hours worked—dropped 1.5 percent in the final three months of the year when compared with the year-earlier period. This was the largest drop in 40 years, despite worsening declines in 2022.

In 2022, productivity dropped 1.3 percent, which is the largest annual decline since 1974 when it fell 1.7 percent.

Productivity was volatile last year. On a 12-month basis, productivity fell by 0.4% in the first quarter. It plunged 2.1% in the second quarter and plunged 1.1 percent during the third quarter.

Compared with the prior quarter, however, productivity improved at a seasonally adjusted and annualized rate of three percent, exceeding Wall Street’s expectations for a 2.4 percent improvement. The third quarter saw productivity rise at an annualized rate of 1.4 percent, which was higher than the preliminary estimate, which was 0.8 percent.

These two quarters of consecutive gains were preceded in quarter one by a plunge of 5.9 percent and in quarter two by a drop of 4.1 percent. The first quarter plunge was the most severe since 1960’s spring. Aside from this, the second quarter was the worst ever since 1990’s 4.1 per cent productivity decline.

U.S. labor productivity rose for the second quarter consecutively in the fourth quarter. However productivity for the whole year saw its greatest decline in nearly 50 years.

U.S. nonfarm labor productivity–a measure of goods and services produced in the U.S. per hour worked-rose at a seasonally adjusted annual rate of 3% in the fourth quarter from the prior quarter, the Labor Department said Thursday.

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