The 1990s Acceleration in Labor Productivity: Causes and Measurement

The acceleration of labor productivity growth that began during the mid-1990s is the defining economic event of the past decade. A consensus has arisen among economists that the acceleration was caused by technological innovations that decreased the quality-adjusted prices of semi-conductors and related information and communications technology (ICT) products, including digital computers. In sharp contrast to the previous 20 years, services-producing sectors-heavy users of ICT products-led the productivity increase, besting even a robust manufacturing sector. In this article, the authors survey the performance of the services-producing and goods-producing sectors and examine revisions to aggregate labor productivity data of the type commonly discussed by policymakers. The revisions, at times, were large enough to reverse preliminary conclusions regarding productivity growth slowdowns and accelerations. The unanticipated acceleration in the services sector and the large size of revisions to aggregate data combine to shed light on why economists were slow to recognize the productivity acceleration. Reprinted by permission of the Federal Reserve Bank of St. Louis