The pandemic productivity boost

The good news: GDP is now slightly higher than before the pandemic.  The not-so-good news: Employment remains 4.4 percent lower.  The intriguing news: labor productivity (which is simply the ratio of GDP to employment) has increased at the fastest rate in 20 years.  If this productivity spurt can be maintained, this would mean rising living standards for all of us.  

I must admit that I was at first surprised by these data.  Covid forced companies to invest more in cleanliness, which means more inputs to get the same output.  They also had to make massive adjustments in operations, and I expected that to be a mixed bag at best.

This recent NYT article provides some insight into why productivity has increased.  A key factor is that the pandemic accelerated the adaptation of some labor-saving technologies.  We see this in the food service business where more orders are placed online (even among customers sitting inside restaurants).  Also, people shifted more of their shopping from in person to online.  Amazon can deliver any consumer good to your door without having a bunch of people standing around to wait on customers.  

Another driver has been work from home.  It seems that workers and bosses have struck an implicit bargain in many workplaces to split the difference on saved commuting time: working more hours AND having more free time at home.