The Federal Reserve Bank of Cleveland has released a report suggesting that US productivity may be on a higher growth trajectory than previously estimated. The study, conducted in collaboration with Yeshiva University, indicates a 41 percent chance that the economy has entered a period of increased productivity growth, based on data through November 2024.
This probability marks a significant rise from earlier estimates, which were below 5 percent before new and revised data on labor productivity, consumption, and real wages became available. The report provides some support for predictions that the US might be experiencing a sustained phase of rapid technological advancement. This is attributed to recent increases in productivity growth, stock market performance, and advances in artificial intelligence.
However, the authors advise caution. They highlight that some recent gains could be temporary, resulting from supply chain recovery and other transient factors. The model still assigns a 59 percent probability to the possibility that the trend growth rate remains low. “Although the model has a good track record at detecting changes in trend growth relatively quickly, it will require at least one, and probably several, more quarters of data to reach a more unambiguous conclusion,” they write.
The Cleveland Fed is part of the Federal Reserve System and serves an area including Ohio, western Pennsylvania, eastern Kentucky, and northern West Virginia. It participates in formulating national monetary policy and supports community well-being through research and educational activities.
