US workers have gotten way less productive. No one is sure why.

In the first half of 2022, productivity fell by a record amount, leaving experts with many explanations, but few answers.

The COVID pandemic brought a surprising boost in productivity, causing some economists to think increased remote work would mark the start of a long-term upward trend. The US Bureau of Labor Statistics ended that line of thinking with its data from the first half of 2022, which revealed the steepest decline in knowledge worker productivity ever reported. Economists, CEOs and other leaders suggest a number of reasons for the drop, but definitive answers remain elusive.

Manufacturing industries – where the numbers are “strong” – can more easily and accurately measure productivity, the output of an employee in an hour. Knowledge workers’ productivity, which proves harder for employers to measure, has suffered a shocking drop. 

However, one economist finds that this variable data doesn’t provide a clear, unified picture. Kathy Kacher, founder of Career/Life Alliance Services, said leaders feel pressure to increase performance and to define a “post-pandemic normal.” 

“The leaders are not seeing what they want, and they’re starting to get anxious.” (Kathy Kacher)

Microsoft CEO Satya Nadella calls such anxiety “productivity paranoia.” The technology that many companies use to track workers’ activity has a negative impact on employees and productivity. Other leaders agree that paranoid leaders are likely to end up with “activity,” but not “results.”

Tech leaders at Google and Meta have sought to increase output by identifying “low performers” and requiring more work from every staff member.

Productivity affects living standards, wages and economic growth. With inflation increasing and a possible recession looming, employees are working more hours but amassing fewer results. This could stem from difficulties in hiring, the “tug-of-war” over work locations and “quiet quitting,” – doing the least amount possible to earn a paycheck.

“Another theory is that all workers are just in a productivity funk.”

Former US Treasury Secretary Larry Summers sees the reduction in employee effort as part of a larger issue. He contrasts it against the amount of work people accomplished in 2020 and 2021, a level of output that he regards as unsustainable.

Online employee reviews today mention “burnout” 42% more often and “overwork” 12% more than they did in 2019. Then again, actions that would have resulted in a company firing an employee before COVID don’t have that impact now in fields where the labor market is tight.

The first quarter of 2021 had the highest productivity numbers in years.

The boost in productivity at the start of 2021 was likely due to the pandemic “recession,” according to Kenan Institute economist Gerald Cohen. Companies laid off their lowest performing staff members, and those remaining filled the void. New technology also helped increase output.

“Before the pandemic, the economy had just started to shake off a productivity lull.”

Cohen posits that the combination of inflation and interest rate increases could be causing the “slump.” France, Germany and Canada are experiencing similar slow downs. Productivity cycles usually last 10 to 20 years. By 2019, the cycle was moving beyond 2008, but with inflation affecting “hiring, training and investments” decisions, the slowing trend seems likely to last through the start of 2023.