The gap between productivity growth in the United States and Europe paints a stark and, for Europeans, depressing picture.
In the two decades since 2004, U.S. productivity growth, as measured by the value of output per hour worked, has been more than double that of the eurozone. Whereas eurozone productivity has flat-lined and even fallen slightly since the outbreak of the COVID-19 pandemic, U.S. nonfarm output per hour has risen by more than 6% over the same period — more than adequate performance by America’s own historical standards.
Something seems to be going seriously right in the U.S. and seriously wrong in Europe. Some accounts point to the strong fiscal stimulus applied in the U.S. since the outbreak of the pandemic. For Europeans this explanation is reassuring, because it suggests that the differential is transitory. After all, the U.S. can’t run massive budget deficits and live beyond its means indefinitely.