Is High Productivity Growth Returning

US productivity may be on a higher growth trajectory than previous estimates, according to a new report from the Cleveland Fed.

A model developed by researchers from the Cleveland Fed and Yeshiva University estimates that there is a 41 percent chance that the economy has entered a period of higher productivity growth, based on data through November 2024.

That estimated probability was running below 5 percent until the recent release of new and revised data points related to labor productivity, consumption and real wages.

The higher estimated probability lends some support to predictions that the US has entered a sustained phase of rapid technological advancement based on recent increases in productivity growth, stock market performance, and advances in artificial intelligence.

But the authors recommend caution. They argue that some recent gains may be due to supply chain recovery and other transitory factors. They also note that "the model still ascribes a 59 percent probability that the trend growth rate remains low."

"Although the model has a good track record at detecting changes in trend growth relatively quickly, it will require at least one, and probably several, more quarters of data to reach a more unambiguous conclusion," they write.

Read the Economic Commentary: Is High Productivity Growth Returning?