Lessons from the Latest Data on U.S. Productivity

Productivity growth is carefully scrutinized by macroeconomists because it plays key roles in understanding private savings behaviour, the sources of macroeconomic shocks, the evolution of international competitiveness and the solvency of public pension systems, among other things. However, estimates of recent and expected productivity growth rates suffer from two potential problems: (i) recent estimates of growth trends are imprecise, and (ii) recently published data often undergo important revisions. This paper documents the statistical (un)reliability of several measures of aggregate productivity growth in the US by examining the extent to which they are revised over time. We also examine the extent to which such revisions contribute to errors in forecasts of US productivity growth. We find that data revisions typically cause appreciable changes in published estimates of productivity growth rates across a range of different productivity measures. Substantial revisions often occur years after the initial data release, which we argue contributes significantly to the overall uncertainty policymakers face. This emphasizes the need for means of reducing the uncertainty facing policymakers and policies robust to uncertainty about current economic conditions.