Labour productivity growth picked up in 2017 and we suspect that it will rebound a little further over the next couple of years, as rising capacity constraints and the tightening labour market encourage a new wave of capital deepening. But a more sustained recovery will require a rise in so-called multifactor productivity growth, which has so far remained elusive.
There are plenty of emerging digital technologies, including machine learning and driverless vehicles, which have the potential to drive a resurgence in multifactor productivity growth. The trouble is that any boost to labour productivity may be a decade away or more. In the meantime, there is little to suggest that many recent advances, such as the rise of free or ad-supported digital services, are providing much support to market-based business activity.
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