"unexpectedly strong productivity growth"

From the same Working Paper I referenced yesterday morning:

During the so-called “New Economy Era,” labor productivity (output per hour) played a key role in shaping the Federal Open Market Committee’s (FOMC) response to evolving economic conditions. Indeed, productivity discussions have a long history at FOMC meetings. For instance, unexpectedly strong productivity growth during the early 1980s generated arguments that would become familiar to participants more than a decade later.

Hmm. Productivity growth during the "New Economy Era" of 1994-2001... and productivity growth "during the early 1980s".

Went to FRED. Searched for output per hour. Found 26 series. Some are for manufacturing in other nations. Some have start-dates in the 1980s and 1990s. I sorted the results by start-date, selected the four domestic (U.S.) series with start-dates before 1960, and clicked Add to New Graph:

Graph #1: Four Measures of Output per Hour

Next, I looked at it on a log scale, because it was easy to do:

Graph #2: Same as the first graph, but on a Log Scale

I want to see the changes in output per hour. So I turned off the log scale and looked at "percent change from year ago" values:

Graph #3: Same as the first graph, but as Change from Year Ago

Not so obvious before 1960 where the recessions are close together, but after 1960 it seems that productivity spikes up immediately at the end of a recession, then trends more slowly downward to the next recession. You can see it after the 1960 recession and maybe the 1970 recession and definitely after the 1974 recession and the 1982 recession and the 2001 recession.

But not after the 1991 recession. From maybe 1993, productivity trends upward to 2000 or later. This difference corresponds to the "New Economy Era" (1994-2001) described in the working paper. This is the same period that Robert J. Gordon has called the U. S. macroeconomic miracle.

I want to focus now on Output per Hour in Manufacturing in the United States, the green line from Graph #3 above:

Graph #4: Output per Hour in Manufacturing (U.S.)

I see two spikes between 1982 and 1990. The first comes at the end of a recession. The second comes later, more like the result of a "miracle" than the aftermath of a recession. This, I suspect, is an indication of the "strong productivity growth during the early 1980s" noted in the working paper. Despite the date discrepancy.

Now I want to take Graph #4 and add to it in red the percent change numbers for base money:

Graph #5: Growth rates of Output per Hour (green) and Base Money

Between the 1974 and 1980 recessions the red and green lines quite clearly move in opposite directions. But that pattern changed. Coming out of the 1982 recession productivity and money growth peak twice, simultaneously, before the next recession. Then, beginning with the 1991 recession, both lines show a third peak, this time a double-peak. And in the latter 1990s -- the "new economy" years -- the red and green lines quite clearly move together.

The three peaks I point out, between the 1982 recession and the mid-1990s, are the same three bumps I have pointed out several times before on this blog.

The red line on Graph #5 shows the growth rate of base money. For the record, base money is money actually issued by the central bank of a country.

Those bumps in the money are part of a policy that allowed "unexpectedly strong productivity growth" to develop, ever so briefly.