The Weird and Lovely Surge of US Productivity Growth (Timothy Taylor, July 3, 2025, Conversable Economist)
Economists have come up with four potential explanations. Three of those suggest this surge in productivity growth probably won’t continue.
The first explanation is that this is mostly just a reflection of the rise of work from home. … [I]f an increase in work from home drove the extra boost to productivity, that would be a one-time boost to the level of productivity, not a change to the overall growth rate going forward.
The second explanation is what economists call “labor reallocation and increased match quality.” Which kind of tells you why you should never ask for messaging advice from people with PhDs in economics. But this is just the idea that before Covid people were stuck in jobs they didn’t love and then the Great Resignation essentially let people rematch to do things that they are more motivated or better suited to do, and productivity went up. Even if you buy that as a driver, quit rates and other measures of job turnover are back to their pre-Covid levels, so the lovefest is probably done. This one, too, would be a one-time increase to the level of productivity, not a longer-lived change to the growth rate.
The third explanation is entrepreneurial dynamism: The number of startups each year was steady or falling for a long time, and it jumped at the start of Covid to a higher level and it hasn’t gone back down. But again, if new firms have higher productivity, this jump will show up as a one-time increase, not a sustained increase in the growth rate.
The fourth and final explanation is that this boom in productivity has been tech and AI driven. I realize that might have been where many of you first started, but note that economists are still skeptical—mainly because there hasn’t been enough adoption yet to explain why the economy-wide productivity growth rate would’ve increased this much.