Which sectors are responsible for the slowdown of labour productivity in the US?
To address this question, Figure 2 breaks aggregate labour productivity into three broad sectors: Industry, Construction and Market Services. While the picture for the Industry sector is somewhat volatile, growth rates since 2005 are certainly lower than in the past 10 years. The Market Services sector has also seen a long-term fall in the trend of labour productivity growth since the 1998 peak. However, an important driver in the fall in labour productivity growth for the Total Economy is Construction. The Construction sector is around 5% of Total GDP but due to the poor productivity performance it has been a significant drag on aggregate productivity. The latter culminates in 2007, with an abysmal negative 12% labour productivity growth in Construction accounting for negative 0.6 percentage points of aggregate productivity growth. What is important to stress is that these trends started between 4 to 2 years before the crisis.
