Technology People and Productivity - Long-term Productivity Trends In Two Sectors

Some of the data from the previous panel — for manufacturing and construction — are shown here to illustrate effects over a longer period of time. In this display the number of employees needed to produce $1 million in output is calculated using deflated 1996 dollars, hence values vary slightly.

Manufacturing is a sector that responds well to innovation and automation. The construction sector does not. Not surprisingly, productivity in manufacturing is growing. In 1958, 10.4 employees produced $1 million in shipments; by 2000, it only took 4.4 people. Notice that in the periods of recession (especially 1960, 1970, 1982, 1991), productivity slowed or reversed. Sales declined more rapidly than employment.

Construction shows quite another pattern. The overall trend shows that it took more people to produce $1 million in output (construction put in place) in 2000 (9.48 people) than in 1964 (7.6 people). Notice further that peaks in this jagged curve coincide precisely with years of recession. The peaks may be due to industry dynamics: contractors under-bid jobs to keep busy; margins are lower; the same employment produces less in construction put in place. In construction, as elsewhere, employers retain people even as business softens. Declines in total construction put in place, measured in percent, are typically much sharper than declines in employment. The high rate of unionization in construction is also a factor in relatively sluggish employment response to business downturn.

However, productivity trends in construction, as measured here, indicate that this sector is much more dependent on traditional methods of production.

Source: U.S. Bureau of the Census, U.S. Department of Commerce (shipments and construction put in place) and Bureau of Labor Statistics, U.S. Department of Labor (employment data).