EU shows productivity gains, trails U.S.

January 20, 2005

The European Union (EU), spurred by gains by both its old and newest members, has registered rising productivity growth, but it still significantly trails the U.S., The Conference Board reported in a new productivity study.

Productivity in the EU-25 nation bloc grew from 1.3 percent to 1.6 percent in 2004, and labor input growth increased from an anemic -0.2 percent to 0.7 percent.

"The turnaround in 2004 in both productivity and employment growth is welcome news for the EU," said Dr. Bart van Ark, consulting director at the Conference Board and a co-author of the report with Dr. Robert McGuckin, The Conference Board's director of economic research. "If Europe, the world's second largest economy, is going to provide the leadership and drive needed for global prosperity as stated in its Lisbon goals, the 2004 results must be sustained and improved upon. Although European GDP growth was about 2.3 percent in 2004, this lags the growth rates achieved in the U.S. and Japan and is far below the growth rates registered in fast-growing countries, such as China and India."

Despite its improved performance, the EU significantly trails the U.S. in productivity gains. The U.S. improved both labor productivity and labor input at about double the EU growth rates. The U.S. maintained a high productivity growth rate of 3.1 percent in 2004. With a big employment turnaround—shifting from a 0.1 percent average growth over the last three years to 1.4 percent in 2004—the jobless recovery appears to be over in the U.S., The Conference Board reported.

On average, the productivity level of the EU-15 was at 92 percent of the U.S. level in 2004, down from 99 percent in 2000 and 100 percent in 1995. This decline reflects both the relatively slow pace of European productivity growth and the acceleration of U.S. productivity gains after 1995. Still, six European countries—Luxembourg, Norway, Finland, Ireland, Belgium, and The Netherlands—exhibited higher productivity levels than the U.S. in 2004.

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