Has the tradeoff between productivity gains and job growth disappeared?
Policymakers’ efforts to boost trend output growth may be hampered by the presence of a tradeoff between productivity gains and job creation. This paper presents empirical evidence that the negative relationship between productivity growth and employment growth that prevailed in the 1960s and 1970s has disappeared since then. This finding is robust to using alternative measures and including other explanatory variables. The improved tradeoff may be good news for policymakers who aim at raising the ‘speed limit’ of the economy.