Growth and renewal in the U.S.: Retooling Americas economic engine McKinsey Global Institute February 2011 CONFIDENTIAL AND PROPRIETARY Any use of this.
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Growth and renewalin the U.S.: Retooling America’s economic engine
McKinsey Global Institute
February 2011
CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of McKinsey & Company is strictly prohibited
McKinsey & Company 2 |
1 Total non-farm employment, seasonally adjusted2 Preliminary numbers subject to change
SOURCE: U.S. Bureau of Labor Statistics
Decline from peak U.S. employment1
Percentage from peak month prior to recession
Months since employment peak
-6.5
-6.0
-5.5
-5.0
-4.5
-4.0
-3.5
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0
6 0 36 30 24 42 12 18
▪ 8.4 million jobs lost from peak-to-trough (Dec. 2007 to Dec. 2009)
▪ 1.1 million net job gains since the start of 2010 (Jan. 2010 through Dec. 2010)
▪ U.S. employment today (Dec. 2010) is 7.2 million jobs below peak of December 2007
The U.S. job market has lost more than twice as many jobsas in previous downturns
Dec. 2007-Dec. 20102
Feb. 2001-Jan. 2005
June 1990-Jan. 1993
July 1981-Oct. 1983
March-Nov.1980
July 1974-Jan. 1976
McKinsey & Company 3 |
2002 to
2007 139
1991 to
2001 166
1983 to
1990 211
1975 to
1980 240
1961 to
1969 122
SOURCE: Bureau of Labor Statistics; NBER; Moody’s Analytics; Global Insight; McKinsey Global Institute
1 Projections based on current labor force statistics as of Jan 2011 with unemployment rate of 9.0%2 Growth in labor force is average between Moody’s Analytics and Global Insight; Assumes participation of approximately 65%
Number of months1 required to bring back unemployment rate below 5.0%2
Average job growth during major expansions
Thousands per month
The U.S. needs to create 200,000 jobs per month until mid-2017– a feat not seen since the 1980s
3
0
20
40
60
80
100
120
140
300200
Number of jobs created per monthIn thousands
400150 250
Months to close the gap# of months
0 350
Full employment reached in Q2 2017
McKinsey & Company 4 |
-4
-6
-12
-6
74
65
6552
77
4557
38
0
50
100
150
200
250
300
U.S. debt1 by sector, 1952-Q3 2010Percent of GDP
287
91
45
69
220
41
204
24
59
154
16
49
Q3-101990
2000
ChangeP.p. of GDP
1 Includes all instruments that constitute direct credit market borrowing (includes all bond market borrowing and commercial paper); asset-backed securities have been removed from financial sector borrowing to avoid double counting of the underlying loan. Due to a reclassification of GSE MBS in Q1 2010 we have estimated the amount outstanding of GSE MBS in that quarter.
1980
16
13
29
15
74Financial institutions
Households
Non-financial business
Government
2008-102000-08
17
SOURCE: Federal Reserve Flow of Funds; SIFMA; McKinsey Global Institute analysis
After decades of growth, deleveraging has begun
McKinsey & Company 5 |
12,000
14,000
16,000
18,000
20,000
22,000
24,000
Growth that is 1 percentagepoint below trend
Double dip recession,then trend
Trend based on historicalrates of growth
202020152010 2025 2030
U.S. GDP to 2030 under various scenariosBillions of chained 2005 dollars
Cumulativeincrease
43%
63%
74%
SOURCE: U.S. Bureau of Economic Analysis; CMU scenarios; Moody’s Economy.com; MGI analysis
Notes: Historical rate of growth for 1990-2008 is 2.8%; double dip recession assumes GDP declines 1% in 2011, is stagnant in 2012, and trend thereafter
A decline in long-term trend growth could be far more damaging to U.S. wealth and job creation than even a severe double dip recession
McKinsey & Company 6 |
MGI’s current work tackles the two horizons to sustained growth and renewal in the United States
. . . And reignite growth and
renewal of the economy
Retool America’s productivity engine
Revive U.S. competitiveness
Future of R&D and advanced industries
Overcome the drag from
recession . . . Rebalance through deleveraging
Tackle unemployment
Other new and ongoing efforts…
Primary focus of today's discussion
The Productivity Imperative
Productivity growth matters . . .
McKinsey & Company 8 |SOURCE: U.S. Bureau of Economic Analysis; U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis
1 2000-08 data used for 2000s
Contributions to growth in real U.S. GDP, overall economyShare of compound annual growth rate, 1960-2008, %
46
6553 47
20 23
100% =
Increases in the workforce (labor inputs)
Increases in value added per worker (productivity)
2010-20E
2.2
77
2000s1
2.1
80
1990s
3.3
53
1980s
3.2
47
1970s
3.1
35
1960s
4.1
54
More than ever before, the U.S. now relies on productivity gains for GDP growth
McKinsey & Company 9 |
0 5 10 15 20 25 30 35 40
Improvement in per capita GDP by year of birth1
Indexed to 100
260
240
220
200
180
160
140
120
100
Years from birth
SOURCE: U.S. Bureau of Economic Analysis; U.S. Census Bureau; Moody’s Economy.com; McKinsey analysis
40-year growth in per capita GDP Multiplier
2.54x
2.04x
1.96x
1.78x
1 GDP data for 2010–15 is based on McKinsey and Moody’s consensus projections. Thereafter, we assume 1.7 percent productivity growth in line with the historical rate. The share of the working-age population will decline with UN projections (66 percent in 2009; 60 percent in 2030)
Forecast
1.63x
Birth year
1960
1970
1980
1990
2000
Without a productivity boost, younger generations will experience slower increases in their standard of living
McKinsey & Company 10 |
2.2
1.1
1.5
1.8
1.6
2.32.1
1960s
1970s
1980s
1990s
2000s1
1 Includes 2000-08
to sustain historical 2.8% GDP growth
to sustain historical 1.7% GDP per capita growth
Productivity growth rates Compound annual growth rate, %
Productivity gain required . . .
The productivity gains needed to sustain historic GDP growth rates are ambitious
SOURCE: U.S. Bureau of Economic Analysis; Census 2009 population estimates; McKinsey Global Institute analysis
McKinsey & Company 11 |
GDP (PPP) growth decompositionCompound annual growth rate, 1991–2008, %
SOURCE: U.S. Bureau of Economic Analysis; Census 2009 population estimates; The Conference Board;United Nations Population Division; McKinsey Global Institute analysis
Productivity increase required %
1.21.0
1.2-1.0
2.10.8
1.4-0.1
1.7
2.8
0.50.6
34
59
81
8.2
9.3
0.2
Historic GDP growth, 1990-2008
Required acceleration in productivity
0.9
Historic productivity
growth, 1990-2008Growth of working-age population, 2010-20
11China
EU-15
Japan
United States
0.6
0.8
1.0
0.9
Many advanced economies face a similar productivity imperative
McKinsey & Company 12 |
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
0 10 20 30 40 50 60 70 80 90 100 110 120 130
Labor productivity, 2008GDP at purchasing power parity (PPP), per worker, $ Thousands
Global competitiveness score, 2008-09
SOURCE: World Economic Forum, Global competitiveness report 2008-09; The Conference Board
Correlation between productivity and competitiveness for a sample of countries
At the national level, productivity correlates closely with competitiveness
The Productivity Imperative
Productivity growth matters . . .
Productivity growth is not a job-killer and not just about efficiency – value-added growth and innovation matters more
McKinsey & Company 14 |
Rolling periods of employment and productivity change, 1929-2009%; periods
8
1521
6
Increasing employment
and productivity
Declining employment
and increasing productivity
69
4
80
89
76
Five-year periods
1
99
71
Increasing employment
and decreasing productivity
Declining employment
and productivity
Ten-year periods
33
Three-year periods
5
78
Annual
77
At the national level, the “trade-off” between aggregate employment and productivity levels is at best short-term . . .
SOURCE: U.S. Bureau of Economic Analysis; McKinsey Global Institute Analysis
McKinsey & Company 15 |
-10
-8
-6
-4
-2
0
2
4
6
8
10
-5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8
Growth in U.S. employment two quarters afterproductivity growth
Growth in labor productivity two quarters earlier
▪ In 71% of quarters since 1947, productivity growth was followed by employment growth
▪ Only in 7% of periods did employment decline after productivity growth
Annual change, 1947-2010%
SOURCE: U.S. Bureau of Economic Analysis; Bureau of Labor Statistics; McKinsey Global Institute Analysis
Percent of total
In the United States, every point of GDP growth creates between 500,000 and 750,000 jobs
. . . And even in the short term, employment growth has been positively related to productivity, but with a time lag
11% 71%
10% 7%
McKinsey & Company 16 |
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
Wholesale
-2 -1 17167654
Utilities
Retail
3
Value-added growth2
-3
Employment growth
2
Transport
10
Arts/recreationConstruction
Finance/insurance
Education
Agriculture
and mining
Administration
Accommodation/
food services
Realestate
Professional services
Otherservices
Manufacturing
Management
Information
Government
Healthcare
Total productivity growth 1990-2000 was 1.8 percent
Productivity gains were driven by sectors that experienced positive employment growth and increasing value added growth
Positive
Negative
Size represents productivity contribution1
Compound annual growth rate, 1990-2000%
1 Productivity contribution calculated using Moody’s Economy.com data2 Valued-added growth is the contribution of each sector to total GDP growth
In the 1990s, productivity growth was driven by a virtuous cycle of increasing value added and jobs growth
SOURCE: U.S. Bureau of Economic Analysis; Moody’s Economy.com; McKinsey Global InstituteSunrise Productivity Model
McKinsey & Company 17 |
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
0-1-2 1 3 4-3 7 1716
Employment growth
52
WholesaleUtilities Transport
Retail
Real estate
Professional services
Value-added growth2
6
Information
Health care
Govt. Finance/insurance
Education
Agriculture
and mining
Accommodation/
food servicesConstruction
Computers/
electronics
Arts/recreation
Manufacturing
Administration
Other services
Manage-ment
Total productivity growth 2000-08 was 1.6 percent
Large share of productivity gains came from tradable sectors with large efficiency gains and job losses
Negative
Positive
Size represents productivity contribution1
Compound annual growth rate, 2000-08%
Since 2000, the largest contributions to productivity gainswere driven by declining employment
SOURCE: U.S. Bureau of Economic Analysis; Moody’s Economy.com; McKinsey Global InstituteSunrise Productivity Model
1 Manufacturing sector excluding Computers/electronics and Other transportation equipment sectors2 Valued-added growth is the contribution of each sector to total GDP growth
The Productivity Imperative
Productivity growth matters . . .
There are productivity opportunities for laggards AND leaders
Productivity growth is not a job-killer and not just about efficiency – value-added growth and innovation matters more
McKinsey & Company 19 |
0.2
0.10.1
0.1
0
0
0
0.1
0.10.2
0.2
0.2
0.3
0.3
0.40.4
Total productivity growth 1.6
Construction
Other services
Accommodation/food services
Education
Health care
Government
Retail
Transport
Administration
Professional services
Finance/insurance
Wholesale
Real estate
Manufacturing
Information
Computers/electronics
SOURCE: U.S. Bureau of Economic Analysis; U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis
Contributions to labor productivity growth1
Compound annual growth rate, 2000-08, %
Positive contributors to productivity growth
Negative contributors to productivity growth
1 Excludes sectors with contributions with an absolute value of less than 0.015%. Numbers may not sum due to rounding.
Share of GDP% of total
1
5
10
13
6
8
8
3
3
6
13
7
1
3
2
4
The top five sector contributors had a disproportionate impacton total productivity growth between 2000 and 2008
The top five contributors
accounted for nearly 75% of total positive productivity growth and 35% of GDP
Productivity growth matters . . .
The Productivity Imperative
There are productivity opportunities for laggards AND leaders
The U.S. can meet the challenge, but a broad productivity agenda is required
Productivity growth is not a job-killer and not just about efficiency – value-added growth and innovation matters more
McKinsey & Company 21 |
0.4 0.6
1.2
1.0
Potential GDP growth
Productivity enablers(increase in productivity)
Changes in regulated sectors(increase in productivity)
0.2-0.5+
Increases in labor utilization and immigration(increase in labor input)
0.7-1-1
Next-wave innovation(increase in productivity)
Adoption of best practice(increase in productivity)
Change in share of working-age population
Population increase
SOURCE: Organisation for Economic Co-operation and Development; Central Intelligence Agency; World Bank; McKinsey Global Institute analysis
Potential GDP growthCompound annual growth rate, 2010-20, %
GDP growth 1990-2008 = 2.8
(not quantified)
Demographic changes Levers available to companies
Levers involving multiple actors
The U.S. can achieve historic levels of GDP growth, or better . . .
McKinsey & Company 22 |
Drive productivity gains in the public and regulated sectors
1
Reinvigorate the innovation economy2
Develop the U.S. talent pool and harness the full capabilities of the U.S. population
3
Build 21st-century infrastructure to meet the demands of a globally competitive economy
4
Enhance the competitiveness of the U.S. regulatory and business environment
5
Embrace the energy productivity challenge6
Harness regional and local capacities to boost overall U.S. growth and productivity
7
. . . However, a broad agenda is required
www.mckinsey.com/mgi
McKinsey & Company 24 |
APPENDIX: ADDITIONAL SUPPORTING PAGES
McKinsey & Company 25 |
83.5
87.1
75.6-11.5
68.7
74.0
64.9-9.0
9.1
7.3
17.6+10.3
6.1
5.7
4.3-1.4
2009; %
SOURCE: Organisation for Economic Co-operation and Development; World Bank; CIA Fact Book; McKinsey Global Institute analysis
Women (25–64) participation rate Senior workers (55–64) participation rate
Youth unemployment Migration
2010
2000
International comparisons suggest there is room to increase the labor inputs to U.S. growth through increased participation and migration
McKinsey & Company 26 |SOURCE: Organisation for Economic Co-operation and Development; Central Intelligence Agency; World Bank;
McKinsey Global Institute analysis
1 Assumes all else remains constant (e.g., working hours and productivity levels). Numbers may not sum due to rounding2 Excludes impact of dynamic demographic changes over a ten-year period3 All assumptions are based on 2009 data comparing U.S. with international levels; the exception is net migration, which compares U.S. data for 2000
with U.S. projections for 2010
Total impact of labor increases
0.7-1.1
Net migration
0.2-0.3
Youth
unemployment
0.1-0.2
Senior
participation
0.1-0.2
Female
participation
0.3-0.5
Assumptions3 Increase participation of females aged 25-54 in labor force from 76 to 87 percent (Sweden)
Increase participation of workers aged 55-64 from 65 to 74 percent (Sweden)
Reduce unemployment in 15-24 age group from 18 to 7 percent (Netherlands)
Increase net migration from 4.3 per thousand to 5.7 (level of U.S. net migration in 2000)
Increases in the workforce by lever1
Compound annual growth rate, 2009-19, %2
Increasing the U.S. labor force could add a significant amount to GDP growth but would likely require major changes in policy and practices
Total impact of labor force increase is equivalent to ~30 percent of
historic GDP growth of 2.8 percent
McKinsey & Company 27 |
Workers, millions
SOURCE: U.S. Bureau of Labor Statistics; National Center for Education Statistics; National Science Foundation; McKinsey Global Institute analysis
3.1 3.4
17.7
15.814.8
2018 predicted talent demand
Talent
gap
0.2
2008 employ-ment
1.9
Additions from high-skill foreign workers
2018
talent supply
Predicted increase in supply
Absorption of extra capacity
0.4
Predicted attrition
NOTE: Numbers may not sum due to rounding
Industries requiring analytical and technical workers are likelyto experience a talent shortage over the next decade
A substantial talent gap of 10% of total demand will remain, even
under conservative assumptions
McKinsey & Company 28 |
The relative quality of U.S. infrastructure has been declining
SOURCE: World Economic Forum, Global competitiveness report 2010-2011
5.55.55.55.55.65.65.75.85.85.85.85.95.95.96.06.06.06.06.0
6.26.36.36.46.46.4
6.66.66.66.76.8
TunisiaSaudi ArabiaEstoniaMalaysiaBahrainNamibiaChileUnited StatesSpainOmanBelgiumTaiwanBarbadosNetherlandsLuxembourgJapanPortugalCanadaSouth KoreaUnited Arab EmiratesDenmarkGermanyFinlandSwedenAustriaIcelandFranceSingaporeHong KongSwitzerland
302928272625242322212019181716151413121110
987654321
2010 rankingEvolution of rank for United StatesDistance from top ranking
-24
-22
-20
-18
-16
-14
-12
-10
-8
-6
-4
-2
0
201009080706050403022001
Quality of overall infrastructure
McKinsey & Company 29 |
Broadband penetration in the United States is lower than in other countries and varies widely across states
SOURCE: International Telecommunication Union; Federal Communications Commission
Broadband subscriptions per 100 population
24.9
25.325.4
25.8
27.1
29.3
29.4
29.4
29.7
29.830.4
31.1
32.9
33.2
33.8
34.6
35.6
37.3
37.941.1
Japan
Estonia
Australia
Israel
United States
Hong Kong
Finland
Belgium
Canada
United Kingdom
Germany
France
Luxembourg
Iceland
South Korea
Switzerland
Netherlands
Norway
Denmark
Sweden
0
2,500
5,000
7,500
10,000
12,500
15,000
MO
MS
TX
PA
DC
WA
RICO
NJ
CA
NY
PR
0.500.450.20 0.55
HouseholdsThousand
0.700.650.60
Subscribership ratioSubscribed households/total households
0.800.75
Overall United States 0.61
Broadband penetration
McKinsey & Company 30 |
Economic fundamentals
Business climate
Human capital
Infrastructure
SOURCE: McKinsey Global Institute synthesis of data from numerous sources
Leader
Top quartile
Average
Bottom quartile
Key metrics Ten years ago Today Trend
U.S. relative position
Household consumptionHousehold consumption growthGDPStock market capitalizationIndustrial productionTrade as percentage of GDPNational spending on R&D
Business environmentFDI as percentage of GDP1
Growth of local innovation clustersTax incentives for R&DPopulation and demographic profileAvailability of high-quality laborRetention of foreign-born talentCost-adjusted labor productivityPublic expenditure on educationNumber of patent applicationsTransportationTelecommunications
Statutory corporate tax rate
1 Foreign direct investment
U.S. performance on a sample of country competitiveness indicators is declining relative to other countries
McKinsey & Company 31 |
Household electricity bill savings$ per year
SOURCE: U.S. Energy Information Administration; McKinsey Low Carbon Economics tool
0-50
51-75
76-100
101-150
The economic benefit of a 5% increase in energy efficiencyvaries across states
McKinsey & Company 32 |SOURCE: U.S. Bureau of Economic Analysis; McKinsey Global Institute analysis
Productivity growth has been much faster in automotive than in aerospace1
19
79
Automotive Aerospace 1
Applying several practices from best-in-class automotive could drive significant benefit for aerospace2
Production planning techniquesTotal cost
Productivity growth, 2000-08
Assembly line cycle time reductionProduction cycle time
Real-time performance managementLabor productivity
1 Other transportation equipment in the North American Industry Classification System. Aircraft and spacecraft represented around 76% of value added in other transportation equipment in 2006
2 The various practices complement each other; the sizing estimates should not be considered additive
Before
After
80
100 -20%
70
100
-30%100
120
+20%
%
Aerospace can apply the lessons of lean manufacturing and performance management learned in other sectors such as best-in-class automotive
ESTIMATES
McKinsey & Company 33 |
1.8
1.91.9
1.61.61.71.6
1.8
1.6
1.4
1.11.0
1.1
0.80.7
0.50.50.5
0.4
0.60.6
0.8
1.21.2
23222120191817161514131211109876543210Hour patient left emergency room
Supply of patient transport specialists1
1 Based on two specialists transporting patients up to wards 25 percent of their time; assumes 30 minutes per transport.
SOURCE: McKinsey analysis
Admissions to the ward from the emergency room by time of dayNumber of patients per hour per day
In some U.S. hospitals, fixed staffing of patient transport specialists means demand outstrips supply for 15 hours of the day
McKinsey & Company 34 |
Level of supply chain integration facilitated by RFID
Retail sector supply chain
Producer Distributor Distribution center Retail store
RFID attached to individual items
▪ Linkage with self-checkout counters and other in-store wireless devices▪ Monitor food supply
RFID attached to cases of goods
▪ Accuracy check against case numbers▪ Integration of shelf replenishment systems with data from
RFID readers
RFID attached to pallets of goods
▪ Optimization of the commodity flow from supplier to the store
▪ Measurement of performance of suppliers and service providers
Potential implications
Increased visibility ▪ Early identification and timely reaction
Supply chain cost savings
▪ Reduction of inventories▪ Fewer stock-outs and unplanned markdowns▪ Reduction in logistics costs and fewer delays
Effects beyond the supply chain
▪ Enhanced shopping experience▪ Better theft monitoring
Radio-frequency identification (RFID) could be used to managean increasingly integrated supply chain
McKinsey & Company 35 |
Governments can pursue different levels of interventions
SOURCE: McKinsey Global Institute analysis
Government as principal actor
Tilting the playing field
Building enablersSetting ground rules/direction
Agenda items for growth and renewal
Degree of intervention HighLow
Establish and track key productivity metrics by sector
Fund enabling IT infrastructure and training
Set incentives that reward more productive providers/individuals
Conduct “lean” program through the public sector
2 Reinvigorate the innovation economy
Set clear regulatory environment (e.g., GHG1 fiscal)
Establish skill-based points system to manage immigration
Offer tax incentives for private R&D activities
Establish public R&D institutions on strategic industries
3 Cultivate the US talent pool
Set retirement incentives to reward staying in workforce
Establish skill-based points system to manage immigration
Provide subsidized low- cost study loans; attract ex-pats to return
Publicly funded educational systems
4 Build efficient and economically viable infrastructure
Set national standards for construction
Enable private infrastructure investments
Provide fiscal incentives for private infrastructure build-out
Expand and upgrade public infrastructure investment arm
5 Enhance the competitiveness of the business environment
Reduce regulatory complexity
Establish mechanism to share best practices across localities/states
Offer fiscal and other investment incentives
Target multinational companies to attract and pursue
6 Embrace the energy productivity challenge
Set evolving energy efficiency standards
Require energy efficiency reporting for goods and companies
Provide tax benefits to companies engaged in energy-saving activity
Improve efficiency of public buildings and purchasing
7 Harness regional and local capacities
Increase efficiency of local/state business regulation
Strengthen local schools/infrastructure
Offer local fiscal investment incentives
Establish public city broadband networks
1 Drive productivity gains in the public and regulated sectors
1 Greenhouse gases
EXAMPLES
McKinsey & Company 36 |SOURCE: McKinsey Global Institute analysis
What have we learned about the ingredients for productivity
MGI experience over two decades across more than 20 countries and
30 industrysectors
Flexibility in labor and capital markets enables productivity gains by ensuring resources can be deployed quickly and efficiently where they will be most productive
Competitive intensity is the primary driver of innovation and best practice adoption in private companies – this competition leads to aggregate productivity gains as more productive companies gain share and less productive ones exit the market
Innovation that drives value-added growth and efficiency and its diffusion and scaling is the driving force of productivity growth and aggregate economic growth
Large employment sectors need to pull their weight – success in emerging or small innovative sectors is not enough to sustain overall productivity growth
Strong demand is an enabler facilitating balanced growth from both higher efficiency and the transition to higher value goods and services
Sound regulatory and business environment that encourages competition and attracts the most innovative players provides the right incentives for growth
Small improvements in large sectors can make a significant difference for the overall productivity of the economy
McKinsey & Company 37 |
Productivity levels and growth
Far West
Rocky Mountains
Southwest
Plains
Great Lakes
Southeast
Mideast
New England
1.8
1.4
1.2
1.6
1.3
1.5
1.7
1.6
Productivity growthCompound annual growth rate, 2000-08, %
84
87-88
91
97
102
106
113
Productivity levels, 2008$ Thousands per employee
Productivity performance differs significantly across U.S. regions
SOURCE: U.S. Bureau of Economic Analysis; U.S. Bureau of Labor Statistics; McKinsey Global Institute
McKinsey & Company 38 |
MetropolitanStatistical Area GDP Employment
Compound annual growth rate, 2000-08%
Population, 2008Millions
Contribution%
GDP, 2008
1.0
Phoenix 1.1
Baltimore 1.1
Austin 1.1
Pittsburgh 1.2
0.9
Tampa
Portland
1.7
1.8
San Diego 1.9
Philadelphia 1.9
Minneapolis 1.4
San Jose 1.5
Miami
Atlanta
San Francisco
Chicago
2.5
2.9
Dallas 3.3
4.1
Los Angeles 6.7
New York 12.2
Boston
2.0
Houston
2.6
Washington, DC
18.8
12.9
5.3
6.1
9.5
4.5
5.6
4.2
5.8
3.0
2.2
5.4
1.8
3.2
2.4
1.6
2.7
4.2
2.7
5.3
Productivity
1.7
0.8
1.2
0.9
0.6
0.8
1.2
0.8
1.6
0.7
1.2
2.1
1.9
2.4
2.0
3.4
2.3
2.5
4.9
8.1
Productivity growth, 2000-08
0.6
0.5
1.5
0.9
0.1
0.1
1.8
-0.4
0.5
1.3
0.8
1.4
-1.3
0.4
0.3
1.8
0.7
2.7
0.7
1.3
2.6
2.4
3.7
2.9
1.3
1.8
3.0
1.1
1.7
3.4
4.3
3.0
1.5
2.0
2.4
4.8
2.3
4.0
2.5
2.0
2.0
1.8
2.2
2.0
1.2
1.8
1.2
1.6
1.2
2.1
3.5
1.6
2.8
1.6
2.2
2.9
1.6
1.3
1.8
0.7
The top 20 U.S. cities account for more than 50% of national productivity growth and approximately 40% of GDP
SOURCE: U.S. Bureau of Economic Analysis; U.S. Bureau of Labor Statistics; Moody’s Economy.com;McKinsey Global Institute
Total 53%
Total 41%
McKinsey & Company 39 |SOURCE: U.S. Bureau of Economic Analysis; U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis
3.6
1.5
Labor productivity (real value added per worker)$ Thousands, 2000 Compound
annual growth rate, 1990–2007%
Recession years
U.S. multinational companies have increased productivity more than twice as fast as other U.S. private sector firms
90
80
70
60
120
110
100
0
U.S.multinationalcompanies
All other
companies
07 052000951990
McKinsey & Company 40 |
Opportunities exist for leaders and laggards
1 Productivity contribution was calculated using Moody’s Economy.com data.
Top quartile
25th–50th quartile
Bottom quartile
1990-20001 2000-08
Goods Manufacturing 36.7 19.2
Construction -0.5 -11.0
Natural resources 1.6 0.2
Computer and electronic products n/a 22.5
Real estate and rental and leasing 19.8 18.4
Wholesale trade 17.5 11.2
Information 7.4 21.6
Services Transportation and warehousing 3.8 3.9
Retail trade 9.8 1.5
Administrative and other services -4.7 5.6
Accommodation and food services -2.8 -3.2
Other services (except public admin.) -1.7 -4.8
Arts, entertainment, and recreation -0.7 -0.8
Finance and insurance 16.9 9.9
Professional, scientific, technical services 7.3 9.7
Management of companies 0.7 -0.6
Regulated and public
Government -4.1 1.0
Health care and social assistance -8.1 -1.7
Educational services -1.5 -3.1
Utilities 2.5 0.5
Contribution to productivity growth%
Retail can continue to drive productivity
growth through greater integration of online and offline channels, and innovations in responding to and
engaging customers
Healthcare can increase productivity through
greater use of available technology (e.g., e-mail,
electronic record keeping) and broader
adoption of established lean principles
Aerospace can further improve productivity by
continuing to set the bar for innovation while making use of standard
lean principles
SOURCE: U.S. Bureau of Economic Analysis; Moody’s Economy.com; MGI Sunrise Productivity Model
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