10 PART 1: RECENT ECONOMIC AND FINANCIAL DEVELOPMENTS h percentage point faster than its gain a year earlier. Among measures that do not take account of benefits, average hourly earnings rose slightly less than 3 percent through January of this year, a gain that was somewhat faster than the average increase in the preceding few years. Similarly, the measure of wage growth computed by the Federal Reserve bank of atlanta that tracks median 12-month wage growth of individuals reporting to the Current Population Survey showed an increase of about 3 percent in January, similar to its readings from the past three years and above the average increase in the preceding few years.' and likely was restrained by slow owth of lab ductivity 6. Change in business-sector output per hour These moderate rates of compensation gain likely reflect the offsetting influences of Percent, annual rate tightening labor market and persistently weak productivity growth. Since 2008, labor productivity has increased only a little more than I percent per year, on average, well 3 below the average pace from 1996 through 2007 and also below the gains in the 1974-95 period (figure 6). Considerable debate remains about the reasons for the general slowdown in productivity growth and whether it will persist The slowdown may be partly attributable to the sharp pullback in capital investment 1948 996-200 during the most recent recession and the NOTE: Changes are measured from Q4 of the year immediate relatively long period of modest growth easured from 2007: Q4 through 20/ar of the period. The final period is in investment that followed but a reduced SOURCE: Bureau of Labor Statistics via Haver Analytics. pace of capital deepening can explain only a portion of the step-down. Beyond that, some economists think that more recent technological advances, such as information technology, have been less revolutionary than earlier general-purpose technologies, such as electricity and internal combustion. Others have pointed to a slowdown in the speed at which capital and labor are reallocated toward their most productive uses, which is reflected in fewer business start-ups and a reduced 5. The atlanta Fed's measure differs from others that it measures the wage growth only of workers whe were employed both in the current survey month and 12 months earlier10 Part 1: Recent Economic and Financial Developments ½ percentage point faster than its gain a year earlier. Among measures that do not take account of benefits, average hourly earnings rose slightly less than 3 percent through January of this year, a gain that was somewhat faster than the average increase in the preceding few years. Similarly, the measure of wage growth computed by the Federal Reserve Bank of Atlanta that tracks median 12-month wage growth of individuals reporting to the Current Population Survey showed an increase of about 3 percent in January, similar to its readings from the past three years and above the average increase in the preceding few years.5 . . . and likely was restrained by slow growth of labor productivity These moderate rates of compensation gain likely reflect the offsetting influences of a tightening labor market and persistently weak productivity growth. Since 2008, labor productivity has increased only a little more than 1 percent per year, on average, well below the average pace from 1996 through 2007 and also below the gains in the 1974–95 period (figure 6). Considerable debate remains about the reasons for the general slowdown in productivity growth and whether it will persist. The slowdown may be partly attributable to the sharp pullback in capital investment during the most recent recession and the relatively long period of modest growth in investment that followed, but a reduced pace of capital deepening can explain only a portion of the step-down. Beyond that, some economists think that more recent technological advances, such as information technology, have been less revolutionary than earlier general-purpose technologies, such as electricity and internal combustion. Others have pointed to a slowdown in the speed at which capital and labor are reallocated toward their most productive uses, which is reflected in fewer business start-ups and a reduced 5. The Atlanta Fed’s measure differs from others in that it measures the wage growth only of workers who were employed both in the current survey month and 12 months earlier. 1 2 3 4 Percent, annual rate 6. Change in business-sector output per hour 1948– 73 1974– 95 1996– 2000 2001– 07 2008– present NOTE: Changes are measured from Q4 of the year immediately preceding the period through Q4 of the final year of the period. The final period is measured from 2007:Q4 through 2017:Q4. SOURCE: Bureau of Labor Statistics via Haver Analytics