The Bureau of Labor Statistics reported that productivity increased at a 3.6 percent annual rate and is now up 2.4 percent over the last year. This is a big improvement from its 1.3 percent average growth rate since 2005.
This is very good news, if it proves to be real and is sustained. It would mean that we can have more rapid improvements in living standards and have more resources for things like a Green New Deal and Medicare for All. But folks should probably hold the celebration, for now, it is very possible that this figure is a fluke since productivity data are subject to large revisions and are extremely erratic. (Arguing for the fluke story, self-employment was reported as dropping at more than a 7.0 percent annual rate in the first quarter. That's possible, but not very likely. Fewer self-employed means fewer hours, and therefore higher productivity.)
Needless to say, the Trumpers were quick to take credit. The Wall Street Journal told readers:
"The recent gains could be a sign that an uptick in investment following tax-law changes passed in 2017 means businesses are spending on the technology and tools necessary to increase output. Some firms have turned to automation—from factory machines to shelf-scanning robots—to ramp up output while growing hours or payrolls more slowly."
The piece then quotes Kevin Hassett, the head of Trump's Council of Economic Advisers:
"The machines people bought last year, they are turning them on this year."
This story doesn't make any sense since there was no tax cut induced investment boom in 2018. Investment in the first quarter of 2019 was 4.8 percent higher than in the first quarter of 2018. That is pretty much average growth and certainly not an investment boom.
There were many previous periods with much more rapid investment growth and no corresponding uptick in productivity. For example, investment grew 8.0 percent from the third quarter of 2013 to the third quarter of 2014. It grew 12.9 percent from the first quarter of 2011 to the first quarter of 2012. In neither case was there any notable uptick in productivity growth.
To see a one percentage point increase in the rate of productivity growth, we would need a jump in investment in the neighborhood of 30 percent. The Hassett story is simply not plausible on its face. The article should have made this fact clear to readers.