Nobody Knows Why Fortysomethings Are Driving U.S. Productivity

Dartmouth College economist James Feyrer noticed something odd about a decade ago: Across a large set of countries, an economy’s productivity seemed to be connected to the proportion of fortysomethings in its labor force. The higher the ratio of people age 40-49, the faster the economy tended to increase its output per hour of work. To be precise, Feyrer wrote in a 2005 working paper, “a 5 percent increase in the size of this cohort over a ten year period is associated with a 1-2 percent higher productivity growth in each year of the decade.”

The finding was bad news when Feyrer’s paper came out, because the sweet-spot age group was shrinking as a share of the U.S. labor force. Now, though, fortysomethings’ share is close to bottoming out—which means one substantial negative for productivity growth is going away. “The drag is nearly done,” Jay Shambaugh, a member of President Obama’s Council of Economic Advisers, said in a September speech.