What really causes falling productivity growth — an energy-based explanation

What really causes falling productivity growth? The answer seems to be very much energy-related. Human labor by itself does not cause productivity growth. It is human labor, leveraged by various tools, that leads to productivity growth. These tools are made using energy, and they often use energy to operate. A decrease in energy consumption by the business sector can be expected to lead to falling productivity growth. In this post, I will explain why such a pattern can be expected, and show that, in fact, such a pattern is happening in the United States.

Figure 4. Total amount of energy used by Commercial and Industrial Sector (excluding transportation) based on EIA Energy Consumption by Sector, divided by Bureau of Labor Statistics Total Non-Farm Employees by Year.

Preview of Figure 4. Total quantity of per capita energy used by the US Commercial and Industrial Sectors (excluding transportation). Computed by dividing EIA Energy Consumption by Sector by Total Non-Farm Employment from the Bureau of Labor Statistics.

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