Report: U.S./Europe Productivity Gap Widens

Manufacturing.Net reports that the gap in productivity growth between the U.S. and Europe has widened sharply as U.S. businesses have been more aggressive in laying off workers and pushing their remaining employees to be more efficient.

In a new report, the Conference Board estimated that productivity, or the amount of output per hour of work, rose in the U.S. by 2.5% in 2009, while productivity was falling by 1% on average in the euro zone, which consists of 16 nations that use the euro currency.

The Conference Board said in their report that the gap would narrow in the current year but the U.S. would still outperform much of the euro zone. Conference Board economists forecast that productivity would strengthen to 3% growth in the U.S. in 2010 and return to positive growth of 2% in the euro zone.

The U.S. normally has enjoyed stronger productivity in recent years than Europe, an increase many economists attribute to fewer U.S. restrictions prohibiting layoffs than in Europe. Over the decade from 1995 to 2005, annual productivity gains averaged 1% higher in the U.S. than the 16 nation euro zone. Productivity rose on average 2.4% in the U.S. during this decade and 1.4% in the euro zone.

U.S. companies have been experiencing a boom in productivity as the amount of output per hour of work rises, due to the workers remaining after successive waves of layoffs turn out more per hour. Productivity rose at an annual rate of 8.1% in the July-September quarter, the biggest jump since 2003, the U.S. Labor Department reported last month.

The report found that productivity growth in the seven largest emerging market economies — Brazil, China, India, Indonesia, Mexico, Russia and Turkey — averaged an estimated 3.6% in 2009, down from a 5.3% growth rate in 2008. Productivity actually fell by an estimated 3.8% in Russia in 2009 and was down 3.2% in Turkey while rising by an estimated 3.9% in India and 8.2% in China.