< Go Back To Blog

Productivity: The Key To Economic Growth

Sigma Investment Counselors

October 9, 2020

Productivity describes various measures of the efficiency of production.  There are many different definitions of productivity.  Perhaps the most common, and probably the easiest to understand, is an aggregate labor productivity measure, such as GDP per worker.  In other words, how much economic benefit is derived from the contribution of each worker.

In order for an economy to grow, there needs to be an increase in the number of workers, and/or an increase in the output of each worker, or, best of all, a combination of increases in the number of workers, combined with increases in productivity per worker.

Near term, the U.S. has a serious unemployment problem, triggered by efforts to contain the impact of Covid-19.  Eventually, it is reasonable to expect the economy to recover and, over time, return to the essentially full employment status the U.S. had achieved prior to the arrival of the pandemic.

Looking past the current economy, Investors should recognize that long-term growth is going to require, in part, adding to the workforce.  This is unlikely to be home grown.  Americans are not having enough babies to replace the existing population, with the 2019 birth rate falling to a new 35 year low.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA

Comments are closed.