What it is
Productivity refers to the efficiency with which an economy uses its resources, primarily labor and capital, to produce goods and services. Higher productivity means more output is generated with the same amount of input, or the same output with less input. This can be driven by technological advancements, improved education, better management practices, or increased capital investment, leading to higher living standards and economic growth.
The Bureau of Labor Statistics (BLS) reports quarterly on nonfarm business sector productivity. Increases in productivity are crucial for long-term economic growth without fueling inflation, as businesses can produce more without raising prices or requiring significant wage hikes. The Federal Reserve watches productivity trends closely because sustained low productivity growth can make it harder to achieve non-inflationary economic expansion.
Why it matters
Productivity growth is essential for long-term economic prosperity and non-inflationary wage increases. It impacts corporate profitability and the overall standard of living.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice