Total Economy Database™ - Key Findings
May 2024
About The May 2024 Release
For an overview of charts and tables, please see the Total Economy Database Summary Tables and Charts, available here, and the Global Productivity Brief 2023.
This release includes updated and revised estimates of the labor productivity and growth accounting variables (including TFP). See our revision notes for the most important changes.
The data can be downloaded through The Conference Board Data Central. Please create an account with The Conference Board for complimentary access to all data files.
Global Labor Productivity is expected to rebound in 2024 as post-pandemic trends start to normalize
The Covid-19 pandemic created a lot of macro volatility. One of those impacts was the severe disruption of labor markets due to economy-wide shutdowns in many regions of the World. Global employment fell by 1.9% in 2020. But it was the more dramatic 5.9% decline in total hours worked that really highlighted the full extent of the shock. In the years after 2020, as economies reopened, the rebound in hours worked accounted for much of the GDP growth during that period.
Real GDP growth can be decomposed into contributions from total hours worked (increasing the quantity of labor) and from labor productivity (increasing the output per hour worked). In the three years following the pandemic shock, real GDP growth was largely dominated by the rebound in hours. Between 2021 and 2023, the latter accounted for 73% of total GDP growth, with labor productivity growth contributing the remaining 27%.
Forecasts for 2024 now indicate a shift back towards a more labor productivity-driven growth environment. We expect Global GDP growth to maintain the 3% pace we saw in 2022 and 2023. Yet, in contrast to the last two years, a substantial 77% of the 2024 GDP growth rate is expected to come from accelerated labor productivity gains. It mirrors the two decades before the pandemic when the contribution from labor productivity averaged 72%, and it is a clear indication that macroeconomic conditions are returning to normal.
The question is, will that new trend be sustainable? The problem is increasing labor shortages will constrain growth in employment and total hours worked. There is still room to raise the participation of women and older workers in the labor force. But population growth is slowing, and the political climate is turning against more immigration. That means improving the rate of labor productivity growth will increasingly become the only way to generate future GDP growth. The good news is the chances of achieving such an improvement look encouragingly good. Investment as a share of GDP is expected to rise in the next five years. Furthermore, technological breakthroughs like the broader adoption of generative AI can potentially transform that investment into meaningful productivity gains.
Chart: Labor productivity is expected to reclaim its role as the dominant driver of global economic growth as the post-pandemic rebound in Labor Inputs normalizes
Contribution of Growth of Labor Productivity, Total Hours Worked to Global GDP growth, 2000-2023, log percentage points.
Source: The Conference Board Total Economy Database™ May 2024
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