A rising standard of living is fundamentally tied to productivity growth. Recent data indicates a significant productivity increase since late 2022, suggesting a steeper growth trend compared to the previous 11 years. However, this increase may not be sustainable. Possible explanations include the influence of remote work, which is seen as a temporary boost; labor reallocation driven by the Great Resignation, allowing people to find better job matches; and existing economic trends that suggest a return to prior growth rates in the near future.
If you look at productivity growth, you'll see that something weird and lovely has been happening over the past two years. Productivity growth since the end of 2022 has been notably faster.
The first explanation is that this is mostly just a reflection of the rise of work from home. That would be a one-time boost to the level of productivity, not a change to the overall growth rate going forward.
The second explanation is referred to as labor reallocation and increased match quality. People were stuck in jobs they didn't love, and the Great Resignation allowed rematching to more suitable roles, increasing productivity.
Three of the potential explanations suggest this surge in productivity growth probably won't continue, implying a questioning of long-term sustainability.
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