Labor productivity in US manufacturing soared in the 1980s. From 1983 to 1989, output per employee in manufacturing1 grew at an annual average of 5 percent, compared with 1.1 percent in 1974-82 and the pre-1974 average of 3 percent (Table 1). No satisfactory explanation for the acceleration in manufacturing productivity has emerged. Net fixed cap ital per worker in manufacturing showed scant growth in the 1980s. The gross capital-labor ratio was also little changed. 2 Reflecting the lack of capital deepening, mul tifactor productivity—productivity not accounted for by labor and capital inputs—advanced at a record pace in the 1980s.

The increased growth of productivity in manufacturing is in sharp contrast to its continued weakness in the rest of the economy. Output per employee in the non farm, nonmanufacturing sector grew at only a 0.4 per cent rate in the 1980s expansion, down from a pre-1974 average of 1.6 percent.