THE LAZARUS EFFECT: AMERICA IS EXPERIENCING A PRODUCTYIVITY MIRACLE / THE ECONOMIST

The Lazarus effect 

America is experiencing a productivity miracle

AI hasn’t—yet—got much to do with it

Illustration: Rose Wong

As with many a miracle, onlookers disbelieved their eyes at first. 

For a decade after the global financial crisis of 2007-09 rich-world productivity growth was, by historical standards, deadish. 

Since prosperity depends on the ability to produce more with the same labour, this consigned even America to eternal stagnation (and don’t ask about Europe). 

The Congressional Budget Office, a fiscal watchdog which consistently overestimated productivity growth in the 2010s, has been consistently glum this decade (see charts 1 and 2). 

Partial data hinting otherwise were dismissed as false prophets.

But those data kept coming. 

And now they are indisputable: over the past five years or so American productivity has been growing at the fastest rate in around two decades. 

Whether you look at output per worker or per hour, it has risen by a lively 2% a year, from a moribund 1% for most of the 2010s (see chart 3). 

This has led the Federal Reserve to raise its median forecast for America’s long-run GDP growth from 1.8% to 2%. 

Jerome Powell, the outgoing chair, bore witness at a recent press conference. 

“I never thought I’d see this many years of really high productivity,” he marvelled in response to a question from The Economist.

It is too early to credit artificial intelligence for the resurrection. 

Productivity picked up in the early 2020s, whereas large language models have come into real commercial use only in the past year or so. 

If previous technological revolutions are anything to go by, the AI age will take at least a few years to show up in productivity statistics. 

Its main macroeconomically discernible impact so far has been on business investment, particularly in data centres.

To divine the real causes of the phenomenon, The Economist started by poring over official data on productivity growth by sector since 2000 from America’s Bureau of Labour Statistics. 

Between 2019 and 2024 the “information” industry—which covers areas from software and telecoms to publishing and film-making—came top with an annual rate of around 6%. 

That was no higher than the annual average in 2000-19. 

Nor is America’s recent uptick the consequence of this particularly efficient industry accounting for a bigger slice of the economy: in the past six years the sector’s share of total American output has hovered between 5.3% and 5.5%.

Instead, some of the biggest jumps in productivity growth have come in professional services and management (see chart 4). 

These make up a tenth of the American economy, up a little from 2019. 

They are the sorts of businesses that do not produce new technology, but are keen users of it. 

In the past few years America’s suits have at last taken full advantage of the signature innovations of the 2010s: smartphones, cloud computing, videoconferencing and the like.

Productivity growth also sped up in oil and gas. 

The shale-fracking revolution of the 2010s turned America from a net energy importer to an exporter. 

In 2023 it sold half as much energy abroad, net of imports, as Saudi Arabia. 

Since then, construction of new liquefaction plants for natural gas has allowed America to send the fuel to Europe and Asia, where it fetches higher prices than at home.

The indirect effects of America’s energy boom may be yet more consequential. 

Electricity is an input into just about everything and Americans pay half as much for it, on average, as Europeans and a third less than the Japanese. 

When it is inexpensive and abundant, workers and machinery can keep producing as much as possible without worrying too much about energy use. 

This helps explain why some energy-intensive businesses like mining and chemicals have not collapsed as they have in Europe.

Another factor behind the spurt in productivity growth is both fuzzier and more fundamental. 

The American economy remains unusually flexible, dynamic and innovative by rich-world standards. 

This makes it particularly adaptable, especially in times of crisis. 

Indeed, the start of the latest productivity boom coincided with the nigh-biblical pestilence of the covid-19 pandemic—and in contrast to the previous big upswing over two decades ago, other rich countries have not experienced the same miraculous revival this time.

The book of jobs

Unlike much of Europe, for instance, America largely opted to hand out pandemic assistance in cash rather than pursuing complex schemes that tied workers to their existing jobs. 

When lockdown lay-offs began to be unwound, people were likelier to find new work in more efficient businesses—because these were the firms best placed to restart hiring.

The American economy is also taking more recent shocks in its stride. 

From the start of 2025 to March 2026, productivity growth was fairly solid—between 1.2% (per American worker including farmers) and 2.1% (per hour for non-farm business) at an annual rate (see chart 2). 

This was despite Donald Trump’s best efforts to the contrary in the form of anti-growth tariffs, mass deportations and attacks on institutions like the Fed. 

It is likely to survive the president’s strategically misguided war in Iran. 

And the AI age will probably show up in those productivity statistics sooner rather than later—even if the models never attain godlike powers. 

Expect the productivity miracle to continue.