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

51 Pages Posted: 23 Jun 2014 Last revised: 30 Sep 2014

See all articles by John G. Fernald

John G. Fernald

Federal Reserve Bank of San Francisco

Date Written: June 2014


U.S. labor and total-factor productivity growth slowed prior to the Great Recession. The timing rules out explanations that focus on disruptions during or since the recession, and industry and state data rule out "bubble economy" stories related to housing or finance. The slowdown is located in industries that produce information technology (IT) or that use IT intensively, consistent with a return to normal productivity growth after nearly a decade of exceptional IT-fueled gains. A calibrated growth model suggests trend productivity growth has returned close to its 1973-1995 pace. Slower underlying productivity growth implies less economic slack than recently estimated by the Congressional Budget Office. As of 2013, about 3⁄4 of the shortfall of actual output from (overly optimistic) pre-recession trends reflects a reduction in the level of potential.

Suggested Citation

Fernald, John G., Productivity and Potential Output Before, During, and after the Great Recession (June 2014). NBER Working Paper No. w20248. Available at SSRN:

John G. Fernald (Contact Author)

Federal Reserve Bank of San Francisco ( email )

101 Market Street
San Francisco, CA 94105
United States
415-974-2135 (Phone)


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