NCPA - National Center for Policy Analysis

Measuring The Service Sector

February 21, 1997

Economist are beginning to question the accuracy of government figures concerning the nation's productivity rates -- particularly in measuring productivity in the services sector. For while services have led the technological charge, their growth rates are showing up as anemic in federal data.

Under-measuring services growth would pull down overall productivity figures.

  • Though the Labor Department has reported that productivity grew 2.2 percent in the last three months of 1996, the annual figure was only 0.8 percent -- a far cry from the 2.2 percent annual growth rates of the 1950s and 1960s.
  • The annualized productivity growth rate for the 1990s thus far is only 0.88 percent.
  • Many analysts warn that the government statistics are failing to capture the effects of dramatic technological and organizational changes since the mid-1980s.
  • While manufacturing productivity increases over the last two years have approached the 4 percent levels of the mid-80s, overall productivity growth has fluctuated around 1 percent since 1973.

To avoid what they see as the shortcomings of government productivity data, some analysts have developed their own data. Deutsche Morgan Grenfell economist Ed Yardeni says his model -- based on workforce levels and corporate sales -- places average annual productivity growth since the late 1980s close to 3 percent.

Source: Peronet Despeignes, "Is U. S. Productivity Really Falling?" Investor's Business Daily, February 21, 1997.


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