Quarter after quarter the macroeconomic news from the United States teaches the same lesson: real GDP growth at a sustained rate of 3% per year is not enough to increase America's employment level. Not even real GDP growth at a sustained annual rate of 4% is sufficient to increase the share of American adults who have jobs. The underlying rate of labor productivity growth in the US, which we pegged at 1.2% per year at the start of the Clinton administration and at 2% to 2.5% per year at the end of the 1990's boom, now seems even higher: it is getting harder and harder to keep the estimated labor productivity growth trend below 3% per year.
How long this boom in productivity growth will continue is anyone's guess: optimists point to the fact that waiting behind the information technology revolution, ready for takeoff, is the biotechnology revolution, and behind that is a looming nanotechnology revolution. If such improvements in productivity do last, the vistas this will open are amazing: an America 50 years from now in which the average full-time worker earns not $40,000 a year, but the equivalent of today's $160,000 a year.