A surprising increase in productivity in the U. S. economy during the Trump presidency, which has perplexed economists. It highlights how productivity growth has emerged alongside low inflation and rising wages, suggesting a potentially new economic phase.
• Surging Productivity: The Bureau of Labor Statistics reported productivity grew at an annual rate of 4.9% in Q3 2025 and 4.1% in Q2 2025, marking the best consecutive quarters since Trump's previous term.
• Economic Growth Context: Productivity growth has occurred despite stable unemployment and is seen as a sign of sustained economic expansion.
• Cleveland Fed Insights: Economists from the Cleveland Federal Reserve believe there is a 40% chance the U. S. has entered a high-productivity growth phase, though they need more data to confirm this conclusion.
• Causes of the Productivity Increase:
• Economists are unsure if artificial intelligence is a significant factor yet.
• The increase in productivity is likely due to broader investments in innovation rather than just AI.
• Trump’s economic policies, specifically tax incentives for capital investment and a tight labor market, are believed to have triggered this growth.
• Domestic Investment Shift: Many businesses are moving away from offshoring and investing more domestically to increase productivity. This change might be due to past policies that made it easier to rely on cheap labor offshore.
• Tariff Impact: Trump maintained tariffs from his first term, which has also encouraged domestic production. U. S. steel production surpassed Japan's for the first time in 26 years due to tariff policies.
• Steel Industry Growth: The rise in steel production (3.1% increase in 2025) indicates a thriving domestic industry, supported by increased tariffs on imports.
• Contradicting Predictions: Critics of tariffs had expected a decline in productivity from domestic manufacturing. However, the increase in domestic production has resulted in greater investments in productivity-enhancing technologies.
The article presents a picture of a U. S. economy experiencing a productivity boom under Trump’s policies, defying the expectations of mainstream economists. Factors such as tariff policies, a tight labor market, and domestic investment strategies are seen as key drivers of this unexpected growth. These changes may signify a fundamental shift in America's economic landscape.
https://spectator.org/the-productivity-boom-economists-didnt-see-coming/
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