Experience suggests that such rapid advances are unlikely to be maintained in an economy that has reached the cutting edge of technology.

Unit labor costs so far have been of less concern than I might have expected a couple of years ago. Productivity gains have certainly helped.

[Wage and compensation growth] is extremely stable.  Even though unemployment has been declining, we're just not seeing any pressure on compensation growth.  Productivity growth is astoundingly high.

Productivity growth over the next few years does not take breakthrough scientific or technological inventions, it comes from the application of stuff that's already known.

In the year ahead, the U.S. economy should continue its solid performance, growing nearly 4 percent with productivity growing more than 2.5 percent. Taking a longer view, we will continue to achieve such strong levels of performance if we provide fiscal, monetary, and regulatory policies that encourage an open, competitive, progressive, and noninflationary economy—an economy in which the entrepreneur and the American worker can thrive.

I do not anticipate a marked and persistent downshift in U.S. productivity growth that would greatly reduce the expected returns from holding dollar-denominated assets. 

In the latter half of last year, the growth of output per hour slowed, giving a boost to unit labor costs after two years of declines. Those increases were not large, however, and productivity growth seems to have increased at a good clip in the first quarter of this year.

Like the introduction of new technologies, the globalization of the marketplace has been and continues to be a good thing. It fosters greater specialization and gains from trade, affording everyone higher living standards.

Unavoidable economic logic suggests that eventually this situation will prove unsustainable: our deficit and other countries’ surplus positions will come into better balance. The question is how...National savings need to grow. One way to increase savings is to cut the federal deficit...Another source of adjustment would be an increase in the personal savings rate...Rising productivity also could help us grow out of the problem...But it is likely wishful thinking to rely on faster productivity alone even if it is sustained at current levels...A strong case can be made to begin to address this issue sooner rather than later. And personally, I would start with the federal budget deficit.

Workers near retirement have accumulated many years of valuable experience, so extending labor force participation by just a few years could have a sizable impact on economic output.

Higher home prices in turn have encouraged households to increase their consumption. Of course, increased rates of homeownership and household consumption are both good things. However, in the long run, productivity gains are more likely to be driven by nonresidential investment, such as business purchases of new machines.

Slower productivity growth would have negative consequences for economic activity and would boost inflation because less rapid productivity growth translates into more rapid increases in firms’ production costs...[But] my view is fairly optimistic. I think there is some evidence that the economy is continuing to reap productivity gains from much of the investment firms and people already have made.

Currently projected budget deficits are unsustainable and will ensure a low level of national saving. Conventional economic analysis suggest that this situation is likely to raise long-term interest rates, crowd-out business capital investment, depress productivity growth, and exacerbate the current account deficit.

Favorable productivity developments would help to alleviate the impending budgetary strains. But unless productivity growth far outstrips that embodied in current budget forecasts, it is unlikely to represent more than part of the answer.

When productivity grows at a faster rate, the economy can grow faster—resulting in higher incomes and producing more goods and services for all of us to enjoy—without generating inflationary pressures. This ultimately makes our job at the Federal Reserve easier, because our mandate is to set monetary policy to support maximum sustainable economic growth and price stability.