Productivity Declined in 2020

Most of the US workforce was negatively impacted by the pandemic in 2020. But as restrictions for most industries have eased up and workers have adapted, productivity has started to increase again.

By Nate Griffin – November 18th, 2021

Key Findings:

• Most industries saw declines in productivity.

• Healthcare, education and hospitality saw the biggest losses.

• The decline was the largest since the '08 financial crisis.

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The Bureau of Labor Statistics released its annual report Total Factor Productivity in Major Industries. Due in large part to the effects of the COVID-19 pandemic, Total Factor Productivity (TFP) declined in most industries measured by the BLS.

Only 5 of the 21 major industries reported gains.

TFP is defined as the total output per unit of combined inputs which includes: Labor, capital services, energy and materials.

The Pandemic has created many barriers for workers including additional protective equipment and social distancing. These precautionary measures likely create inefficiencies in the production process.

Industries with many office workers, such as IT, finance, legal, and other professional fields saw relatively little decline as workers adapted to working from home. Other industries saw massive declines.

The healthcare industry has been struggling as working conditions deteriorated. US News reports that 20% of healthcare workers have quit during the pandemic, largely due to burnout.

Hospitality and food service industries were heavily impacted during 2020, with a record number of restaurants closing shop, and many hotels unable to fill occupancy.

The arts and entertainment industries were heavily disrupted by the effects of the pandemic. Many concerts, live theatrical performances, and even movie and television productions were either shut down completely or had to greatly adapt their practices to remain open.

A report from the Federal Reserve Bank of San Francisco found that TFP for all industries fell 1.5 percent in 2020. The worst decline in productivity since the 2008 Financial Crisis.

However, in the four quarters ending Q3 2021, productivity grew at an annualized rate of 3.3 percent as pandemic related restrictions eased up.