Productivity and Potential Output Before, During, and After the Great Recession

U.S. labor and total-factor productivity growth slowed after the early- to mid-2000s in aggregate, industry, and regional data. The broad-based nature of the slowdown, and its timing, rules out simple stories related to housing and finance before the recession, or to effects of the recession itself, but is consistent with some models of the effects of information technology. A calibrated growth model suggests trend productivity growth is only slightly faster than its 1973-1995 pace. One implication is that about ¾ of the shortfall of actual output from pre-recession estimates of trend reflects a reduction in the level of potential.