NEW YORK — Despite worries of a recession and the credit crunch dampening the U.S. economic outlook for 2008, U.S. productivity growth is expected to accelerate to 1.7 percent this year, according to the Conference Board.
Productivity growth rates in Europe, Japan and the U.S. were low in 2007, with the U.S. underperforming at 1.1 percent, compared to the longer-term trend of 1.5 to 2.5 percent. The growth rates for Europe and Japan were at 1.4 percent.
Although there was slow increase in U.S. productivity, the level of GDP per hour worked was still among the highest in the advanced economies at $52.10.
The report cautions that advanced economies need to raise annual productivity growth above 2 percent over the next 20 years to maintain current living standards.
In emerging economies, such as the BRIC countries — Brazil, Russia, India, China — productivity growth topped 8 percent. However, productivity levels in emerging economies are still low at between 10 and 40 percent of the U.S. level.
“Rapid adjustment to competitive pressures and greater innovation in emerging economies have made fundamental and lasting changes in the global competitive landscape,” said Bart van Ark, executive director of economic research at the Conference Board. “One of the most significant changes is the emphasis on innovation-related spending in the emerging world. While expenditure of R&D and investment in information and communication technology in emerging economies are still at less than half of the level in advanced economies, the spending gap is narrowing. This reflects a commitment to compete on the basis of innovation capacity, not just cost.”
Europe experienced a slowdown in labor productivity growth, with output per hour worked rising by 1.4 percent in the European Union, down from 1.7 percent the previous year.
For 2008, productivity growth is expected to slow to 1.3 percent.
“While some progress is being made on structural reforms, particularly in labor markets and services industries, many of these reforms have come late and are often patchy,” says van Ark. “Furthermore, Europe seems to have greater trouble in having innovation and knowledge creation turn into the creation of more productive jobs, as GDP growth and employment — at least in the short run — often offset each other.”
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