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The recent Q2 release by the BLS on "Productivity and Costs", shows a big drop in productivity (the biggest ever since 1948): more work-hours but less output.

Nonfarm business sector labor productivity decreased 4.6 percent in the second quarter of 2022, the U.S. Bureau of Labor Statistics reported today, as output decreased 2.1 percent and hours worked increased 2.6 percent.

They add that this is a continuation of what we saw in Q1:

The second quarter of 2022 is the second consecutive quarter in which output decreased while hours increased.

I am trying to understand what the reasons are for this sharp current decline. In my searches I've found some articles about the long-term slowdown in productivity in developed countries, but the long-term trend does not explain the current sharp decline we see.

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    $\begingroup$ Probably mostly general volatility in the series that the pandemic and subsequent recovery made even more volatile. Q4 came in at 6.3% which was (apart from a COVID spike in 2020) the largest value since 2009. The accurately pin down if that is a true shift will require a lot more data in my opinion. Similar to home ownership rates as explained here. $\endgroup$
    – AKdemy
    Aug 10, 2022 at 14:40
  • $\begingroup$ Although surveys should not be biased anymore because of COVID but a peculiar thing is that employment and hours increased while GDP declined, which is not usually coninciding. $\endgroup$
    – AKdemy
    Aug 10, 2022 at 15:04

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As @Akdmey suggested it appears to be primarily related to COVID-19 shock: in late 2021 we saw a surge in nonfarm business productivity. It can be explained, As outlined by The Conference Board, by the change in the share of the less-productive business (services) on the output:

As lower-productivity services reopen—and the pandemic surge in goods consumption abates—pandemic-related productivity gains are receding.

It still might strike the reader as an odd thing that the output decreased while hours of work increased. I believe this might be an example of Simpson's paradox: as it might be the case that in both types of business: the less-productive services and the productive business, the output is positively correlated with more work hours; yet as a result of the share of less-productive business now higher, when we sum the two types of business together we might see what we see in this report: less output - more work hours.

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  • $\begingroup$ So people who used to work in more productive jobs during the pandemic are now back to their unproductive jobs? $\endgroup$ Aug 11, 2022 at 0:00
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    $\begingroup$ @PaŭloEbermann, more likely that people who were out of the job market entirely during the pandemic are now back in their low-productivity jobs. $\endgroup$
    – Mark
    Aug 11, 2022 at 1:29
  • $\begingroup$ @Mark but this wouldn't explain why the total output is now lower (unless "low-productivity" is actually "negative productivity"). $\endgroup$ Aug 11, 2022 at 19:55
  • $\begingroup$ @PaŭloEbermann. I think you are right. Another option was that having more workers was not correlated with higher output this Q in productive businesses. I'm not entirely sure what is "output"; maybe it is eventually strongly related to consumption? (which would explain how a "real" decline in productivity is possible in such short term). I didn't dive in into that question. $\endgroup$
    – d_e
    Aug 12, 2022 at 6:13

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