U.S. Productivity Shot Up in the 2nd Quarter of 2023

Not long ago, I discussed how 2022 saw the largest drop in annual U.S. productivity in half a century, and said I hoped there’d be better news soon. Indeed, there has been, as U.S. productivity shot up in the 2nd quarter of 2023 by a whopping 3.7%! (see chart)

We don’t want to make too big a deal about this since it’s just one quarter’s worth of data. It may just be a blip, but it’s the biggest positive blip since since 2020. We’ll see how the rest of the year goes.

What’s Going to Happen in 2023?

Here’s my guesstimation of what’s going to happen for the rest of the year: we’ll see productivity growth for the next two quarters and we’ll wind up in positive territory for the year.

Goodbye Great Resignation, Hello Job Skills

Why am I optimistic? Several reasons. First, the era of high voluntary turnover (aka, Great Resignation) is over, which means employees are getting to really know how do those new jobs so many of them took recently. Productivity goes up as people gain more knowledge about how to efficiently do their work.

Figuring Out Remote, Hybrid and RTO

Second, organizations are working out the whole remote and hybrid work thing. As I’ve said before, I’ve been dubious that remote work alone was responsible for the downturn in productivity. In fact, you could make an equally strong case that it was return-to-office policies that were hammering productivity.

But now many organizations are figuring out what does and doesn’t boost productivity. The firms that know how to manage remote workers well will leave things alone. After all, these employees know how to stay productive at home, and their managers know how to manage these relationships well.

But organizations that have seen problems will bring more people back into the office, at least for a few days a week. Moreover, they and their managers will get a better handle on which employees do and don’t work from home well.

It’s About the Worker, Stupid

I can’t stress this last point enough because no one mentions it these days. A lot of this doesn’t come down to remote or on-premise work per se. It comes down to individual employees. There are those who work from home well and those who do not. Over time, organizations and employees themselves discover which is which, and they adjust accordingly.

Then There’s Generative AI

Generative AI doesn’t yet make everyone more productive. It’s still highly unpredictable and it confabulates a lot. But, as with remote work, over time employees and managers will start to know what it does and doesn’t do well. And, as more developers will get experience with the open source AIs like LLAMA, they’ll learn how to productize AI applications more successfully.

This will result in a productivity boost over time. In some fields, it’ll be a huge one. That won’t just (or even primarily) be due to automation. At least for the next few years, augmentation rather than automation will be key.

A Little and Then Maybe a Lot

As with most new technologies, it’ll take a while before the AI-productivity payoff really kicks in. Once it does, however, we could see massive increases in employee productivity. We don’t know how massive, and we also don’t clearly understand the longer term risks of AI. So, any detailed forecasts are a fool’s game.

Still, systems have a tendency to adjust and stabilize, and today’s workplace system will figure out how to better incorporate the vagaries of remote, hybrid, on-premise, and AI-augmented work as organizations push toward higher productivity. If that happens, the real question will be how equitably those productivity returns are distributed throughout the workforce.

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Mark R. Vickers

I am a writer, analyst, futurist and researcher. I've spent most of my working life as an editor and manager for research organizations focusing on social, business, technology, HR and management trends. But, perhaps more to the point for this blog, I'm curious about the universe and the myriad, often mysterious relationships therein.

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