At his blog, economics columnist Michael Mandel shares an E-mail he received from Northwestern University's Robert Gordon concerning the recent productivity numbers:
The continuing decline in the productivity growth trend provides further evidence that the productivity growth revival of 1995-2004 was a one-time event. In the late 1990s the primary cause of the productivity growth revival was the dot.com boom and invention of the WWW. During 2001-03 the further good news on productivity growth was due to a combination of the delayed impact of the 1990s technology surge (the "intangible capital" hypothesis) with unusually savage corporate cost cutting that caused the prolonged decline in payroll employment between 2001 and 2003.
My take: I like one-time events that cause a decade or more of higher productivity. We can thank the huge drop in penalties on investment in the 1980s for the economic boom in the 1990s. Could use a few more one-time events like that. A whole bunch of them, in fact. One way to get them is to make sure the economy is as innovative as possible by ensuring the return to financial capital and human capital is as high as possible. Productivity is the whole ball game, folks. And innovation is the key to higher productivity.