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Will the pandemic boost productivity growth?

Productivity growth surged during the pandemic last year, but that was principally due to the disproportionate job losses in low-productivity sectors like leisure & hospitality, which raised the economy-wide average level. The pandemic also accelerated structural changes such as the switch to working from home and online sales, but neither are significant enough to provide any lasting boost to economy-wide productivity growth over the medium term. We are also sceptical that the pandemic-related surge in IT investment will lead to any dot com-style boom in productivity, since it has not ignited the gains in multifactor productivity seen in the late 1990s and early 2000s. Even though the acute labour shortages developing in some sectors would normally herald an acceleration, the return of low-productivity workers means that we expect productivity growth to slow from 2.6% in both 2020 and 2021, to 0.8% in 2022 and 2023. Over the longer term, however, we still expect productivity growth to average 2.0%.

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