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America’s Quiet Productivity Boom May Be More Important Than the Headlines

For much of the last two decades, investors and economists worried that the US economy was slowing structurally. Productivity growth, the engine that ultimately drives wages, profits, and long-term market returns, appeared stuck in a low gear.

That may now be changing.

A recent article from The Economist argues that the United States is experiencing a meaningful acceleration in productivity growth, with output per worker rising at roughly 2% annually over the past five years. That is a substantial improvement compared with the sluggish post-financial-crisis era.

Angus Schaal
C. Angus Schaal, CFP®

Senior Managing Director

Importantly, this productivity improvement is not being driven solely by artificial intelligence, at least not yet.

Instead, businesses are finally beginning to fully integrate technologies that have existed for years: cloud computing, smartphones, digital workflows, videoconferencing, automation, and better data systems. In many ways, corporate America may simply be getting better organized.

That matters because productivity is one of the few economic forces capable of improving living standards without necessarily creating inflation.

When workers and businesses become more efficient, companies can produce more goods and services with the same amount of labor and capital. Over time, that tends to support:

  • Higher corporate earnings
  • Rising wages
  • Stronger economic growth
  • Improved profit margins
  • Greater national competitiveness

For investors, productivity growth is especially important because long-term stock market returns are ultimately tied to earnings growth, not headlines.

Why This Could Be Different

Economists have debated the “productivity paradox” for decades, meaning transformative technologies often take years before they meaningfully appear in economic data. Historically, major innovations such as electricity, railroads, and the internet required businesses to reorganize themselves before the real benefits emerged.

That may be what we are seeing now.

The pandemic forced companies to modernize quickly. Remote work, digital infrastructure, automation, and operational restructuring accelerated dramatically between 2020 and 2023. Many firms are now operating leaner and more efficiently than they were before COVID.

Artificial intelligence may eventually amplify this trend further, but most economists believe the measurable impact from AI is still in its early stages.

The Market Implications

If productivity growth remains elevated, it could have meaningful implications for markets over the next decade.

Higher productivity can help offset some of the pressures created by:

  • Aging demographics
  • Large government debt levels
  • Rising labor costs
  • Inflationary pressures

It may also help explain why the US economy has remained surprisingly resilient despite higher interest rates and persistent uncertainty.

At the same time, investors should avoid assuming this automatically creates a straight-line economic boom. Productivity gains can be uneven across industries, and periods of rapid technological change often create both winners and losers. Some economists also warn that excessive optimism around AI and future productivity could eventually contribute to speculation or inflationary pressures if expectations move ahead of reality.

Our View

The bigger takeaway is not whether America is experiencing a “miracle.” The more important point is that innovation, adaptability, and corporate efficiency still appear very much alive in the US economy.

That matters because long-term investing success is built on the productive capacity of businesses over time.

Short-term market movements are often driven by politics, fear, or headlines. Long-term wealth creation is driven by earnings, innovation, and productivity.

This is one reason we continue to believe disciplined, diversified, long-term investing remains the most effective approach for most investors.

Source: “America Is Experiencing a Productivity Miracle,” The Economist, May 11, 2026.

Disclosures:

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