📊 Summary of the Total Factor Productivity for Major Industries Report (2024)

Total Factor Productivity (TFP) is a key measure of economic efficiency, showing how well industries turn inputs—like labor, capital, energy, materials, and services—into output. The 2024 “Total Factor Productivity for Major Industries” report from the U.S. Bureau of Labor Statistics provides a detailed look at how TFP changed across 21 major U.S. industries, highlighting trends, drivers, and implications for the broader economy.

Overview of 2024 TFP Trends

In 2024, TFP increased in 13 out of 21 major U.S. industries. This means that these industries produced more output per unit of combined input, reflecting improvements in efficiency, technology, or organizational practices. The leading contributors to TFP growth were the retail trade and the agriculture, forestry, fishing, and hunting sectors.

Key points include:

  • 📈 Output Growth: 15 of 21 industries saw output rise in 2024. The educational services industry had the largest output increase at 12.4%.
  • ⚡ Input Growth: Combined inputs (labor, capital, and intermediate goods/services) also rose in most industries, with educational services again leading at 11.0% growth, mainly due to higher intermediate input use.
  • 🔄 TFP Growth: TFP rose when output growth outpaced the growth in combined inputs. This was most notable in retail trade and agriculture-related industries.

1. What is Total Factor Productivity?

  • 🧮 TFP measures the efficiency with which industries convert all inputs into output.
  • 🛠️ It captures effects not directly measured by input growth, such as technological advances, improved management, and organizational changes.
  • 📊 TFP is calculated as the ratio of real output to a weighted index of combined inputs (capital, labor, energy, materials, and services—often called KLEMS).

2. Business Cycle Context (2019–2024)

  • 🔄 Over the 2019–2024 business cycle, 12 of 21 industries experienced TFP growth.
  • 📉 Output growth was widespread, with 17 industries increasing output. However, declines were concentrated in goods-producing sectors like mining and manufacturing.
  • 👷 Labor input rebounded in 16 industries, reflecting recovery from pandemic-related job losses in 2020.

3. TFP and Labor Productivity

  • 🏭 Labor productivity (output per hour worked) increased in 16 of 21 industries in 2024.
  • 🧩 Labor productivity growth can be broken down into TFP growth and the contributions of capital, labor composition, and the intensity of energy, materials, and services use.
  • 💡 In 6 industries, TFP was the main driver of labor productivity growth, especially in retail trade and agriculture.
  • 🛎️ Service intensity (greater use of purchased services per labor hour) was a significant factor in educational services, management, and finance.

4. Sectoral Insights

  • 🏢 The private business sector’s output growth in 2024 was driven equally by TFP and capital input (each contributing 1.1 percentage points), with labor input adding 0.3 percentage points.
  • 🏭 The report divides the economy into four broad sectors: goods-producing, information and communication technology (ICT), finance/insurance/real estate (FIRE), and service-providing. Each sector’s TFP contribution to output growth varies, reflecting differences in technology adoption, capital investment, and organizational efficiency.

5. Methodology and Data Sources

  • 📚 Output is measured as sectoral output, which excludes intra-industry transactions.
  • 🧾 Data sources include the Economic Census, annual surveys from the Census Bureau, and price indexes from the BLS.
  • 🧮 Combined inputs are calculated using a Törnqvist index, weighting each input by its cost share.

💡 Summary

The 2024 Total Factor Productivity for Major Industries report shows that most major U.S. industries improved their efficiency, with TFP growth outpacing input growth in over half of the sectors. Retail trade and agriculture led the way, while educational services saw the largest increases in both output and input use. The report highlights the importance of technological change, better management, and input substitution in driving productivity gains. For the U.S. economy, these trends suggest ongoing recovery and adaptation following the disruptions of the COVID-19 pandemic, with TFP playing a crucial role in long-term growth.

References: 

Total Factor Productivity for Major Industries, US Bureau of Labor Statistics

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