As the world economy continues to grapple with stagnant productivity growth, the global GDP per hour worked is expected to rise 1.2% this year, according to The Conference Board Global Productivity Brief 2023.

Although the figure is an improvement from the zero growth witnessed in 2022, it falls short of the 3.8% surge recorded in 2020 and the annual average growth of 2.6% observed between 2011 and 2019.

The report noted global labor productivity will disappoint for the third straight year in 2023 — reflecting the reversal of 2020’s pandemic forces as well as new economic shocks.

The initial spike in global productivity witnessed during the pandemic, fueled by the shut-down of less productive labor-intensive service-sector activities, proved to be temporary. The subsequent reopening of these activities in 2021 and 2022 led to a rebound in global GDP, primarily driven by increased labor inputs (hours worked) rather than improved productivity.

In 2023, the overall GDP combined with a 1.1% increase in total hours worked is forecast to rise 2.3% due to factors such as supply chain disruptions, high inflation and interest rates, and the ongoing war in Ukraine. The figure reflects that catch-up potential does not always translate into high productivity growth rates.

The report anticipates that labor productivity growth will improve slightly to just below +2% per annum over the next decade.

The report also noted that labor productivity growth in mature economies has been weak, with the US expected to witness a substantial decline for the second consecutive year. GDP per hour worked in the US is projected to fall 0.7% this year, following a 1.1% decline in 2022. Despite the decline, US labor productivity remains about 4% above pre-pandemic levels.

“While modest labor productivity growth is expected to return in 2023, the trend remains disappointing — posing serious long-term headwinds for the world economy,” said Klaas de Vries, a senior economist at The Conference Board. “Today’s historically tight labor markets preview a future where aging demographics will increasingly constrain the growth of the labor supply. Without a sustained rise in labor productivity, economies will face a hard limit to growth that impacts all businesses, even the most productive, in the decade ahead. Given this dynamic, firms will look to digital transformation and automation to help increase productivity.”