A Tale of Two Economies: High Productivity Meet Skepticism

By: Anneken Tappe · March 22, 2024 · Reading Time: 3 minutes

Americans have been witnessing a peculiar economy over the past few years. Despite stronger-than-expected growth, many workers feel caught short in the post-pandemic environment, where prices are high, and interest rates are yet to come down.

Rising productivity of America’s labor force is being met with skepticism over companies’ motives and the economic outlook.

Productivity Push

Even so, productivity in the U.S. is rising beyond pre-Covid levels. Labor productivity is driven by a variety of factors including investments in workers, equipment, and technology. In practice, if a company has a skilled workforce, invests in the right tools, and uses both to their fullest potential, productivity will likely increase. And that’s exactly what we’re seeing happen right now.

As recessionary concerns abate and optimism grows that the U.S. economy may have managed a soft landing with reduced inflation and continuous economic growth, corporate confidence is rising. In turn, that is leading businesses to invest more, boosting productivity.

Productivity growth is extremely positive for an economy, as it allows companies to increase output without increasing inflation. When companies are able to produce more goods and services per unit of input, they can pass those savings onto consumers or increase wages to match the higher output, ultimately creating more wealth throughout the economy.

But that’s only one part of the story of America’s post-pandemic economy.

Falling Confidence

Based on metrics like GDP growth, a soaring stock market, and sustained consumer spending, most experts consider the U.S. economy to be strong, if not booming. However, the job cut announcements keep rolling in, and the unemployment rate inched to a two-year high in February (though it remains near historic lows). Less than a third of American workers have confidence in their company’s CEO, according to the 2023 CEO Approval Rating Index from anonymous employee discussion forum Blind.

There seems to be a mismatch between economic reality and how people are feeling about their place in it. And this knock on confidence is important to watch, as consumers are hugely important to U.S. economic growth.

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