Understanding Productivity Growth: CBO’s Most Recent 10-Year Projections Of Potential Output And Total Factor Productivity

From CBO, "CBO’s Economic Forecast: Understanding Productivity Growth" July 19, 2022 Presentation by Aaron Betz, an analyst in CBO’s Macroeconomic Analysis Division, at the NABE Foundation's 19th Annual Economic Measurement Seminar:

CBO regularly publishes economic projections that are consistent with current law—providing a basis for its estimates of federal revenues, outlays, deficits, and debt. A key element in CBO’s projections is its forecast of potential (maximum sustainable) output, which is based mainly on estimates of the potential labor force, the flow of services from the capital stock, and potential total factor productivity in the nonfarm business sector. This presentation describes CBO’s most recent 10-year projections of potential output, highlighting the importance of potential total factor productivity. It discusses the historic slowdown of growth in total factor productivity, as well as changes in total factor productivity during the 2020–2021 coronavirus pandemic, and it explores possible explanations for the slowdown and implications for the future.