Latest / Bloomberg Intelligence / Fed's Fernald on Changing Nature of Productivity in U.S.(Audio)

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Fed's Fernald on Changing Nature of Productivity in U.S.(Audio) · Bloomberg Intelligence

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  Speaker 1: San Francisco or Bloomberg News of Bureau. Welcome you another
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  Speaker 1: guest from the Federal Reserve Bank of San Francisco to
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  Speaker 1: talk to Pim Fox, my co host, and I about
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  Speaker 1: the labor market. John Fernald is Senior Research Advisor at
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  Speaker 1: the San Francisco FED and he's here to talk to
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  Speaker 1: us about a very important topic, which is productivity. Productivity
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  Speaker 1: of workers. John is a very important determinant of growth
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  Speaker 1: in the economy, really helps determine g d P, but
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  Speaker 1: it has slowed a lot. Why Hi, thanks, very very
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  Speaker 1: pleased to be here. Uh. Well, I would highlight not
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  Speaker 1: just the weakness in the past five years, but really
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  Speaker 1: the weakness of the past dozen or so years in productivity.
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  Speaker 1: The productivity was slow leading into the Great Recession. So
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  Speaker 1: I don't think the weakness is just the Great Recession
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  Speaker 1: or it's aftermath. I think it has much more to
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  Speaker 1: do with the new normal. We all wanted the new
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  Speaker 1: normal to be the fast base of productivity growth we
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  Speaker 1: saw in the mid nineties to the mid two thousands,
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  Speaker 1: where information technology was really transforming a lot of what
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  Speaker 1: businesses we're doing throughout the economy. What we've seen in
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  Speaker 1: the past dozen years is that, uh, there's still lots
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  Speaker 1: of transformative things happening in terms of information technology, in
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  Speaker 1: terms of mobile and cloud can computing and artificial intelligence,
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  Speaker 1: but it hasn't been spilling over in the same way
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  Speaker 1: two businesses throughout the economy elsewhere outside of the production
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  Speaker 1: of information technology. John, So, so, how do you measure productivity?
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  Speaker 1: And is where has all the productivity gone in the
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  Speaker 1: United States? A great question. So, of course productive by
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  Speaker 1: the basic thing I mean by productivity is output per
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  Speaker 1: hour work or GDP per hour work, which is at
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  Speaker 1: some level it's it's a narrow part of the things
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  Speaker 1: we all care about. We care about things beyond just
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  Speaker 1: market sector g d P UH, but it's the main
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  Speaker 1: locus of innovation in the eco onomy. And so you've
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  Speaker 1: output per hour can go up because we have better skills,
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  Speaker 1: people are more educated, and go up because we give
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  Speaker 1: people more tools to work with, you know, more equipment
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  Speaker 1: and software and structures and UH research development, or because
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  Speaker 1: we innovate broadly. So, but one of the things you
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  Speaker 1: saw in the mid nineties on really coming before that
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  Speaker 1: is things like distribution, which was just transformed by the
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  Speaker 1: fact that UH businesses like Walmart figured out lots of
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  Speaker 1: great ways to reorganize the distribution sector. You know how
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  Speaker 1: they got products into their stores and into the hands
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  Speaker 1: of consumers. They could do it much more cheaply, much
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  Speaker 1: more efficiently. Well, the other thing you saw is that
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  Speaker 1: low efficiency, uh, low productivity. Your mom and pops dropped out,
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  Speaker 1: I mean they were they were forced out of business.
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  Speaker 1: So you've got a reallocation towards those high productivity firms. Well,
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  Speaker 1: that process naturally comes to an end. I mean you
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  Speaker 1: get at a one time improvement and you put a
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  Speaker 1: new place, a new thing, the low productivity firms center
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  Speaker 1: exit and you're left with kind of ongoing incremental gains. Well,
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  Speaker 1: so it's great to have high productivity, and it's great
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  Speaker 1: to have more efficiency, but it seems to me we
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  Speaker 1: are just we're just limitating more and more jobs without
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  Speaker 1: creating because we can't create the jobs. This happens organically, right,
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  Speaker 1: I mean inventions and new technologies, but so many technologies
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  Speaker 1: now are labor saving and labor limiting. Are we gonna
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  Speaker 1: have like a two tier society where some people have
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  Speaker 1: the touch jobs and they make a lot of money
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  Speaker 1: and everybody else grows baby carrots? You know, because that's
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  Speaker 1: all it's gonna be left to do is really pursue
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  Speaker 1: the new food trends or something. I'm being a little
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  Speaker 1: bit extreme, but I think a lot of people are worried.
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  Speaker 1: That's right. So one thing Mary mentioned on on her
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  Speaker 1: segment is that this has been going on for two
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  Speaker 1: hundred years. Two hundred years ago, people were worried that
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  Speaker 1: automation was going to cost jobs. What it's done is
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  Speaker 1: UH often cost jobs in the areas that really produced
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  Speaker 1: the innovation UH, but created new jobs elsewhere, because for
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  Speaker 1: one thing, it's generating income and real purchasing power and
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  Speaker 1: increases in real wages that then people spend elsewhere. So
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  Speaker 1: it is UH in the long term, do not cost jobs.
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  Speaker 1: In the long term, it's it's we found new places.
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  Speaker 1: I know there's a lot of concerns that maybe this
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  Speaker 1: time is different. I think it's still hard to say
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  Speaker 1: on that front. What I will say is, UH, even
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  Speaker 1: if your productivity is still just sort of ink growing incrementally, UH,
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  Speaker 1: it's very hard to predict where the job gains will
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  Speaker 1: come UH and which jobs are going to be eliminated.
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  Speaker 1: And so there's a lot of need for flexibility in
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  Speaker 1: the economy, both the benefit from ideas and to ensure
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  Speaker 1: that people can take advantage of the opportunities they have
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  Speaker 1: just quickly, John, intangible investments in things such as organizational capital,
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  Speaker 1: they complementary to things like you know, information and communication technology. Absolutely,
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  Speaker 1: that's something we've really scene as you get information technology
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  Speaker 1: where the processing speed gets faster, communications gets easier when
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  Speaker 1: you have data storage gets better, and businesses then have
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  Speaker 1: to figure out, well, how do we benefit from this,
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  Speaker 1: how do we take advantage of this to change how
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  Speaker 1: we do our business. So we're you know, we're obviously
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  Speaker 1: we're I mentioned I mentioned retail where I'm sort of
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  Speaker 1: focused on your brick and mortar change, but of course
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  Speaker 1: a lot steadily things move online and businesses find ways
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  Speaker 1: to think about the complimentarities between online and brick and mortar.
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  Speaker 1: Thank you very much, John Fernald. He is a senior
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  Speaker 1: research advisor at the San Francisco Federal Or Reserve. You're
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