Productivity grew at a strong 2.5% rate in the late 1990s, fueling the economy's 4.1% growth rate. Now, the combination of the tech meltdown, slowing globalization, and the need to divert resources to government to pay for stepped-up defense and security means that sustainable productivity growth will fall to only about 2%.
Even at 2%, productivity growth will remain far above the 1.4% rate the U.S. posted during the slow years of the 1970s and '80s. It now appears to be returning to long-term historical averages. And though the factors driving productivity growth, such as high levels of investment and trade, have slipped from recent highs, they remain well above historic levels.