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The three supporting readings tell you how much weight to put on the probability: confidence reflects category-level track record, stability tracks how the estimate has moved over time, models shows whether the four agree.
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Current productivity growth data from the Bureau of Labor Statistics (BLS) shows a YoY increase of 1.5% in Q2 2023, indicating a slowing trend from earlier recovery phases. Historical patterns since the financial crisis show that productivity growth has seldom exceeded 2.5% YoY during periods of economic uncertainty and slow wage growth, which we are currently experiencing. Recent Federal Reserve policies focused on inflation control could stifle investment in productivity-enhancing infrastructure, further impacting growth.
US labor productivity growth has averaged around 1.5% to 2.0% annually over the past decade, with a recent surge in Q1 2024 to 4.5% YoY, driven by factors like AI adoption and a strong economic rebound. While this pace is unlikely to be sustained at this extreme, a return to the 2.5% threshold in any 2026 quarter is plausible as the productivity benefits of technological advancements continue to filter through the economy, albeit at a slower, more normalized rate than the exceptional Q1 2024 figure.
US labor productivity growth has averaged 1.4% annually over the past decade but showed signs of acceleration post-pandemic, reaching 2.6% YoY in Q2 2023 and 2.5% in Q3 2024. For 2026 to exceed 2.5% in any quarter requires sustaining above-trend growth, which is plausible given: (1) AI-driven capital deepening and software adoption likely to generate measurable productivity gains by 2026, (2) the productivity acceleration seen in recent quarters suggests structural improvement rather than temporary cyclical effects, and (3) historical precedent shows productivity regularly exceeds 2.5% during normal expansions (occurred in 8 of 10 quarters 2016-2019). The main headwind is mean reversion risk if growth slows and labor force participation growth moderates.
US nonfarm business sector productivity growth averaged 1.4% YoY in 2023-2024, with only one quarter above 2.5% since 2021Q2; the 2025Q3 print of 2.2% YoY remains below the threshold despite AI-related capital spending, and BLS data show labor productivity growth decelerating from 2.7% in 2023Q1 to 1.8% in 2025Q2 amid cooling output growth and stable hours. Policy factors include sustained 4.1-4.3% unemployment and the absence of fiscal stimulus comparable to 2020-2021, while structural headwinds such as slowing total factor productivity gains outside tech limit upside.