Gauge of U.S. Innovation Sees Big Gain in 2018

March 21, 2019

Quantifying innovation seems like a tricky and subjective task, but there is one metric that is widely accepted to measure the growth of innovation in America, and this measurement jumped in 2018. Multifactor productivity tracks growth in output that is not accounted for by additions of capital and labor. It is meant to represent how much more companies are able to produce, not by adding new workers or machines, but by coming up with better ways to use existing resources. In other words, it tracks how companies are able to innovate their processes.

Multifactor productivity grew 1 percent last year, the biggest increase since 2010. Multifactor productivity has lagged in recent years. Even with 2018’s large increase, multifactor productivity has averaged just 0.4 percent growth annually since 2007. In the years between 2000 and 2007, it grew by 1.4 percent each year, on average.

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