Trying to predict how fast productivity will rise is one of the more difficult tasks that economists and investors can undertake. The U. S. economy has shown itself prone to sudden and unanticipated shifts in productivity growth, with big effects on the economy and the stock market. The rate of productivity growth fell without warning in the 1970s, ushering in a bear market and a long period of stagnation. Then the equally unexpected jump in productivity growth in the mid-1990s was followed by soaring stock prices and wages. All of which means that when it comes to productivity, uncertainty is the norm. Still, there are plenty of reasons to be optimistic that productivity growth will remain strong based on the information we have today. Indeed, some tentative signs are already emerging that productivity growth could be on the upswing in coming years and may be closer to 2.5% a year, rather than the 2% long-term annual rate that most economists expected just a few months ago.
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