Transcript Farewell to cheap capital- Launch and rollout (1/2)

Growth and renewal
in the U.S.: Retooling America’s
economic engine
McKinsey Global Institute
February 2011
CONFIDENTIAL AND PROPRIETARY
Any use of this material without specific permission of McKinsey & Company is strictly prohibited
The U.S. job market has lost more than twice as many jobs
as in previous downturns
Decline from peak U.S. employment1
Percentage from peak month prior to recession
0
June 1990Jan. 1993
July 1974Jan. 1976
-0.5
▪ 8.4 million jobs lost from
-1.0
-1.5
-2.0
-2.5
peak-to-trough (Dec.
2007 to Dec. 2009)
MarchNov.
1980
Feb. 2001Jan. 2005
-3.0
July 1981Oct. 1983
-3.5
▪ 1.1 million net job gains
since the start of 2010
(Jan. 2010 through Dec.
2010)
▪ U.S. employment today
-4.0
-4.5
-5.0
Dec. 2007Dec. 20102
-5.5
(Dec. 2010) is 7.2 million
jobs below peak of
December 2007
-6.0
-6.5
0
6
12
18
24
30
36
42
Months since employment peak
1 Total non-farm employment, seasonally adjusted
2 Preliminary numbers subject to change
SOURCE: U.S. Bureau of Labor Statistics
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The U.S. needs to create 200,000 jobs per month until
mid-2017– a feat not seen since the 1980s
Number of months1 required to bring back
unemployment rate below 5.0%2
Average job growth during
major expansions
Months to close the gap
# of months
Thousands per month
140
1961 to
1969
122
120
1975 to
1980
100
Full employment
reached in Q2 2017
80
240
1983 to
1990
60
40
211
1991 to
2001
20
0
0 150
200
250
300
350
400
166
2002 to
2007
139
Number of jobs created per month
In thousands
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%
SOURCE: Bureau of Labor Statistics; NBER; Moody’s Analytics; Global Insight; McKinsey Global Institute
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After decades of growth, deleveraging has begun
Change
P.p. of GDP
20082000-08 10
Government
U.S. debt1 by sector, 1952-Q3 2010
Percent of GDP
Non-financial business
300
Financial institutions
250
204
200
100
50
220
74
-6
77
16
17
74
13
-4
91
29
-6
15
-12
287
45
154
150
Households
57
65
38
65
52
49
0 16
1980
69
59
24
41
45
1990
2000
Q3-10
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.
SOURCE: Federal Reserve Flow of Funds; SIFMA; McKinsey Global Institute analysis
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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
U.S. GDP to 2030 under various scenarios
Billions of chained 2005 dollars
Cumulative
increase
24,000
Trend based on historical
rates of growth
Double dip recession,
then trend
22,000
20,000
Growth that is 1
percentage
point below trend
18,000
74%
63%
43%
16,000
14,000
12,000
2010
2015
2020
2025
2030
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
SOURCE: U.S. Bureau of Economic Analysis; CMU scenarios; Moody’s Economy.com; MGI analysis
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MGI’s current work tackles the two horizons to
sustained growth and renewal in the United States
Overcome the
drag from
recession . . .
Primary focus
of today's
discussion
Tackle unemployment
Rebalance through
deleveraging
Retool America’s
productivity engine
. . . And reignite
growth and
renewal of the
economy
Revive U.S.
competitiveness
Future of R&D and
advanced industries
Other new and
ongoing efforts…
McKinsey & Company
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The Productivity Imperative
Productivity growth matters . . .
More than ever before, the U.S. now relies on
productivity gains for GDP growth
Contributions to growth in real U.S. GDP, overall economy
Share of compound annual growth rate, 1960-2008, %
100% =
4.1
Increases in
value added
per worker
(productivity)
3.1
3.2
3.3
2.1
2.2
80
77
20
23
2000s1
2010-20E
35
47
54
53
65
Increases in
the workforce
(labor inputs)
53
46
1960s
1970s
1980s
47
1990s
1 2000-08 data used for 2000s
SOURCE: U.S. Bureau of Economic Analysis; U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis
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Without a productivity boost, younger generations will
experience slower increases in their standard of living
Improvement in per capita GDP by year of birth1
Indexed to 100
Forecast
260
40-year growth in
Birth per capita GDP
year Multiplier
1960
2.54x
220
1970
2.04x
200
1980
1.96x
180
1990
1.78x
160
2000
1.63x
240
140
120
100
0
5
10
15
20
25
30
35
40
Years from birth
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)
SOURCE: U.S. Bureau of Economic Analysis; U.S. Census Bureau; Moody’s Economy.com; McKinsey analysis
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The productivity gains needed to sustain historic
GDP growth rates are ambitious
Productivity growth rates
Compound annual growth rate, %
2000s1
1.6
1990s
1.8
1980s
1970s
1.5
1.1
2.2
1960s
2.1
Productivity gain to sustain historical
required . . .
1.7% GDP per
capita growth
2.3
to sustain
historical 2.8%
GDP growth
1 Includes 2000-08
SOURCE: U.S. Bureau of Economic Analysis; Census 2009 population estimates; McKinsey Global Institute analysis
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Many advanced economies face a similar productivity
imperative
GDP (PPP) growth decomposition
Compound annual growth rate, 1991–2008, %
United
States
Productivity
increase
required
%
2.8
0.5
1.7
0.6
34
2.1
EU-15
1.4
0.8
59
-0.1
1.2
Japan
1.2
1.0
-1.0
81
9.3
0.9
China
8.2
11
0.2
Growth of workingage population,
2010-20
Historic productivity Required
growth, 1990-2008 acceleration
in productivity
SOURCE: U.S. Bureau of Economic Analysis; Census 2009 population estimates; The Conference Board;
United Nations Population Division; McKinsey Global Institute analysis
Historic GDP
growth, 1990-2008
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At the national level, productivity correlates closely with
competitiveness
Correlation between productivity and competitiveness for a sample of countries
Global competitiveness score, 2008-09
6.0
5.5
5.0
4.5
4.0
3.5
3.0
2.5
0
10
20
30
40
50
60
70
80
90
100
110
120
130
Labor productivity, 2008
GDP at purchasing power parity (PPP), per worker, $ Thousands
SOURCE: World Economic Forum, Global competitiveness report 2008-09; The Conference Board
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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
At the national level, the “trade-off” between aggregate
employment and productivity levels is at best short-term . . .
Rolling periods of employment and productivity change, 1929-2009
%; periods
Declining employment
and productivity
Increasing employment
and decreasing productivity
Declining employment
and increasing productivity
80
4
6
78
5
3
76
3
8
71
1
15
21
99
89
Increasing employment
and productivity
77
69
Annual
Three-year periods
SOURCE: U.S. Bureau of Economic Analysis; McKinsey Global Institute Analysis
Five-year periods
Ten-year periods
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. . . And even in the short term, employment growth has been
positively related to productivity, but with a time lag
Percent of total
Annual change, 1947-2010
%
Growth in U.S. employment two quarters after
productivity growth
10
11%
8
71%
▪
In 71% of quarters
since 1947, productivity
growth was followed by
employment growth
▪
Only in 7% of periods
did employment decline
after productivity growth
6
4
2
0
-2
In the United States,
every point of GDP
growth creates
between 500,000 and
750,000 jobs
-4
-6
10%
-8
7%
-10
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
7
8
Growth in labor productivity two quarters earlier
SOURCE: U.S. Bureau of Economic Analysis; Bureau of Labor Statistics; McKinsey Global Institute Analysis
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In the 1990s, productivity growth was driven by a virtuous cycle
of increasing value added and jobs growth
Size represents
productivity
contribution1
Negative
Compound annual growth rate, 1990-2000
%
Employment growth
6
Positive
Administration
5
Construction Education
Arts/recreation
Real
Health
estate
Professional services
care
Transport
Information
Other
services
4
3
2
1
Government
Management
0
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
Wholesale
Retail
Agriculture
and mining
-1
-2
Utilities
-3
Manufacturing
Finance/
insurance
Accommodation/
food services
-4
-5
-3
-2
-1
0
1
2
3
4
5
6
7
16
Value-added
1 Productivity contribution calculated using Moody’s Economy.com data
2 Valued-added growth is the contribution of each sector to total GDP growth
SOURCE: U.S. Bureau of Economic Analysis; Moody’s Economy.com; McKinsey Global Institute
Sunrise Productivity Model
17
growth2
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Since 2000, the largest contributions to productivity gains
were driven by declining employment
Compound annual growth rate, 2000-08
%
Employment growth
Size represents
productivity
contribution1
Negative
6
5
Arts/
recreation
4
3
Construction
Management
2
1
Govt.
0
Other services
Agriculture
and mining
-1
-2
Positive
Accommodation/
food services
Education
Real estate
Health care
Professional services
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
Finance/insurance
Retail
Utilities Transport
Wholesale
Administration
Information
-3
Manufacturing
-4
Computers/
electronics
-5
-3
-2
-1
0
1
2
3
4
5
6
7
16
17
Value-added growth2
1 Manufacturing sector excluding Computers/electronics and Other transportation equipment sectors
2 Valued-added growth is the contribution of each sector to total GDP growth
SOURCE: U.S. Bureau of Economic Analysis; Moody’s Economy.com; McKinsey Global Institute
Sunrise Productivity Model
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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
There are productivity opportunities for laggards AND leaders
The top five sector contributors had a disproportionate impact
on total productivity growth between 2000 and 2008
Contributions to labor productivity growth1
Compound annual growth rate, 2000-08, %
Positive
contributors
to productivity
growth
Negative
contributors
to productivity
growth
Computers/electronics
Information
Manufacturing
Real estate
Wholesale
Finance/insurance
Professional services
Administration
Transport
Retail
Government
Health care
Education
Accommodation/food services
Other services
Construction
Total productivity growth
Share of GDP
% of total
0.4
0.4
0.3
0.3
0.2
0.2
0.2
0.1
0.1
0
0
0
0.1
0.1
0.1
0.2
1.6
1
5
10
13
6
8
8
3
3
6
13
7
1
3
2
4
The top five
contributors
accounted for
nearly 75% of
total positive
productivity
growth and
35% of GDP
1 Excludes sectors with contributions with an absolute value of less than 0.015%. Numbers may not sum due to rounding.
SOURCE: U.S. Bureau of Economic Analysis; U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis
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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
There are productivity opportunities for laggards AND leaders
The U.S. can meet the challenge, but a broad productivity
agenda is required
The U.S. can achieve historic levels of GDP growth,
or better . . .
Potential GDP growth
Compound annual growth rate, 2010-20, %
GDP growth 1990-2008 = 2.8
0.2-0.5+
(not quantified)
Changes in
regulated
sectors
(increase in
productivity)
Productivity
enablers
(increase in
productivity)
0.7-1-1
1.2
1.0
0.4
Population
increase
Change in
share of
working-age
population
Demographic changes
0.6
Adoption of
best practice
(increase in
productivity)
Next-wave
innovation
(increase in
productivity)
Levers available
to companies
Increases in
labor
utilization and
immigration
(increase in
labor input)
Potential
GDP growth
Levers involving multiple actors
SOURCE: Organisation for Economic Co-operation and Development; Central Intelligence Agency; World Bank;
McKinsey Global Institute analysis
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. . . However, a broad agenda is required
1
Drive productivity gains in the public and
regulated sectors
2
Reinvigorate the innovation economy
3
Develop the U.S. talent pool and harness the
full capabilities of the U.S. population
4
Build 21st-century infrastructure to meet the
demands of a globally competitive economy
5
Enhance the competitiveness of the U.S.
regulatory and business environment
6
Embrace the energy productivity challenge
7
Harness regional and local capacities to boost
overall U.S. growth and productivity
McKinsey & Company
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www.mckinsey.com/mgi
APPENDIX: ADDITIONAL SUPPORTING PAGES
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International comparisons suggest there is room to increase the labor
inputs to U.S. growth through increased participation and migration
2009; %
Women (25–64) participation rate
Senior workers (55–64) participation rate
75.6
64.9
-9.0
-11.5
87.1
74.0
83.5
Youth unemployment
68.7
Migration
17.6
+10.3
7.3
2010
4.3
-1.4
2000
9.1
SOURCE: Organisation for Economic Co-operation and Development; World Bank; CIA Fact Book;
McKinsey Global Institute analysis
5.7
6.1
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Increasing the U.S. labor force could add a significant amount to GDP
growth but would likely require major changes in policy and practices
Increases in the workforce by lever1
Compound annual growth rate, 2009-19, %2
0.2-0.3
0.7-1.1
0.1-0.2
0.1-0.2
0.3-0.5
Female
participation
Assumptions3 Increase
participation of
females aged
25-54 in labor
force from 76 to
87 percent
(Sweden)
Total impact of labor force increase
is equivalent to ~30 percent of
historic GDP growth of 2.8 percent
Senior
participation
Youth
unemployment
Net migration
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)
Total impact of
labor increases
1 Assumes all else remains constant (e.g., working hours and productivity levels). Numbers may not sum due to rounding
2 Excludes impact of dynamic demographic changes over a ten-year period
3 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
SOURCE: Organisation for Economic Co-operation and Development; Central Intelligence Agency; World Bank;
McKinsey Global Institute analysis
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Industries requiring analytical and technical workers are likely
to experience a talent shortage over the next decade
Workers, millions
A substantial talent gap of 10% of
total demand will remain, even
under conservative assumptions
17.7
14.8
2008
employment
0.2
3.1
3.4
Predicted
attrition
Predicted
increase
in supply
0.4
Absorption Additions
of extra
from
capacity
high-skill
foreign
workers
15.8
1.9
2018
talent
supply
Talent
gap
2018
predicted
talent
demand
NOTE: Numbers may not sum due to rounding
SOURCE: U.S. Bureau of Labor Statistics; National Center for Education Statistics; National Science Foundation;
McKinsey Global Institute analysis
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The relative quality of U.S. infrastructure has been declining
Quality of overall infrastructure
Evolution of rank for United States
Distance from top ranking
0
-2
-4
-6
-8
-10
-12
-14
-16
-18
-20
-22
-24
2001 02
03
04
05
06
07
08
09 2010
SOURCE: World Economic Forum, Global competitiveness report 2010-2011
2010 ranking
1 Switzerland
2 Hong Kong
3 Singapore
4 France
5 Iceland
6 Austria
7 Sweden
8 Finland
9 Germany
10 Denmark
11 United Arab Emirates
12 South Korea
13 Canada
14 Portugal
15 Japan
16 Luxembourg
17 Netherlands
18 Barbados
19 Taiwan
20 Belgium
21 Oman
22 Spain
23 United States
24 Chile
25 Namibia
26 Bahrain
27 Malaysia
28 Estonia
29 Saudi Arabia
30 Tunisia
6.8
6.7
6.6
6.6
6.6
6.4
6.4
6.4
6.3
6.3
6.2
6.0
6.0
6.0
6.0
6.0
5.9
5.9
5.9
5.8
5.8
5.8
5.8
5.7
5.6
5.6
5.5
5.5
5.5
5.5
McKinsey & Company | 27
Broadband penetration in the United States is lower than in
other countries and varies widely across states
Broadband penetration
Broadband subscriptions per 100 population
Sweden
Denmark
Norway
Netherlands
Switzerland
South Korea
Iceland
Luxembourg
France
Germany
United Kingdom
Canada
Belgium
Finland
Hong Kong
United States
Israel
Australia
Estonia
Japan
Households
Thousand
41.1
37.9
37.3
35.6
34.6
33.8
33.2
32.9
31.1
Overall United States 0.61
15,000
CA
12,500
10,000
TX
7,500
NY
30.4
29.8
29.7
29.4
29.4
5,000
29.3
27.1
25.8
25.4
25.3
2,500
PA
MO
PR
MS
0
0.20
24.9
SOURCE: International Telecommunication Union; Federal Communications Commission
WA
NJ
CO
DC RI
0.45 0.50 0.55 0.60 0.65 0.70 0.75 0.80
Subscribership ratio
Subscribed households/total households
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U.S. performance on a sample of country competitiveness
indicators is declining relative to other countries
U.S. relative position
Ten years ago Today
Economic
fundamentals
Business
climate
Human
capital
Infrastructure
Key metrics
Household consumption
Household consumption growth
GDP
Stock market capitalization
Industrial production
Trade as percentage of GDP
National spending on R&D
Statutory corporate tax rate
Business environment
FDI as percentage of GDP1
Growth of local innovation clusters
Tax incentives for R&D
Population and demographic profile
Availability of high-quality labor
Retention of foreign-born talent
Cost-adjusted labor productivity
Public expenditure on education
Number of patent applications
Transportation
Telecommunications
Leader
Trend
Top quartile
Average
Bottom quartile
1 Foreign direct investment
SOURCE: McKinsey Global Institute synthesis of data from numerous sources
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The economic benefit of a 5% increase in energy efficiency
varies across states
Household electricity bill savings
$ per year
0-50
51-75
76-100
101-150
SOURCE: U.S. Energy Information Administration; McKinsey Low Carbon Economics tool
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Aerospace can apply the lessons of lean manufacturing and performance
management learned in other sectors such as best-in-class automotive
ESTIMATES
%
Productivity growth has been
much faster in automotive
than in aerospace1
Applying several practices from best-in-class automotive
could drive significant benefit for aerospace2
Productivity growth,
2000-08
Real-time
performance
management
Labor productivity
120
79
100
Assembly line cycle
time reduction
Production cycle time
100
-30%
After
Production planning
techniques
Total cost
100
+20%
Before
-20%
80
70
19
Automotive Aerospace 1
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
SOURCE: U.S. Bureau of Economic Analysis; McKinsey Global Institute analysis
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In some U.S. hospitals, fixed staffing of patient transport specialists
means demand outstrips supply for 15 hours of the day
Admissions to the ward from the emergency room by time of day
Number of patients per hour per day
1.9 1.9
1.8
1.6
1.6 1.7 1.6 1.6
1.8
1.4
1.2 1.2
Supply of
patient
transport
specialists1
0
Hour
patient left
emergency
room
1.1
1.1
1.0
0.8
0.8
0.6 0.6
1
2
3
4
0.7
0.5 0.5 0.5
0.4
5
6
7
8
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
1 Based on two specialists transporting patients up to wards 25 percent of their time; assumes 30 minutes per transport.
SOURCE: McKinsey analysis
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Radio-frequency identification (RFID) could be used to manage
an increasingly integrated supply chain
Retail sector
supply chain
Producer
Distribution
center
Distributor
Retail store
RFID attached to pallets of goods
▪ Optimization of the commodity flow from
▪
Level of
supply chain
integration
facilitated by
RFID
supplier to the store
Measurement of performance of suppliers
and service providers
RFID attached to cases of goods
▪ Accuracy check against case numbers
▪ Integration of shelf replenishment systems with data from
RFID readers
RFID attached to individual items
▪ Linkage with self-checkout counters and other in-store wireless devices
▪ Monitor food supply
Potential
implications
Increased visibility
Supply chain
cost savings
Effects beyond the
supply chain
▪
▪
▪
▪
▪
▪
Early identification and timely reaction
Reduction of inventories
Fewer stock-outs and unplanned markdowns
Reduction in logistics costs and fewer delays
Enhanced shopping experience
Better theft monitoring
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Governments can pursue different levels of interventions
EXAMPLES
Low
Agenda items for
growth and renewal
Setting ground
rules/direction
Degree of intervention
Building enablers
Tilting the playing
field
High
Government as
principal actor
Establish and track
key productivity
metrics by sector
Fund enabling IT
infrastructure and
training
Set incentives that
Conduct “lean”
reward more productive program through the
providers/individuals
public sector
the
2 Reinvigorate
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
the US
3 Cultivate
talent pool
Set retirement
incentives to reward
staying in workforce
Establish skill-based
points system to
manage immigration
Provide subsidized low- Publicly funded
cost study loans; attract educational systems
ex-pats to return
efficient and
4 Build
economically viable
Set national standards Enable private
for construction
infrastructure
investments
productivity
1 Drive
gains in the public
and regulated sectors
infrastructure
Provide fiscal
incentives for private
infrastructure build-out
Establish public R&D
institutions on
strategic industries
Expand and upgrade
public infrastructure
investment arm
Reduce regulatory
complexity
Establish mechanism
Offer fiscal and other
to share best practices investment incentives
across localities/states
Target multinational
companies to attract
and pursue
the energy
6 Embrace
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
regional and
7 Harness
local capacities
Increase efficiency of
local/state business
regulation
Strengthen local
schools/infrastructure
Offer local fiscal
investment incentives
Establish public city
broadband networks
the
5 Enhance
competitiveness of the
business environment
1 Greenhouse gases
SOURCE: McKinsey Global Institute analysis
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What have we learned about the ingredients for productivity
Innovation that drives value-added growth and efficiency and its diffusion and
scaling is the driving force of productivity growth and aggregate economic growth
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
Flexibility in labor and capital markets enables productivity gains by ensuring
resources can be deployed quickly and efficiently where they will be most productive
MGI experience
over two decades
across more than
20 countries and
30 industry
sectors
Strong demand is an enabler facilitating balanced growth from both higher efficiency
and the transition to higher value goods and services
Large employment sectors need to pull their weight – success in emerging or small
innovative sectors is not enough to sustain overall productivity growth
Small improvements in large sectors can make a significant difference for the
overall productivity of the economy
Sound regulatory and business environment that encourages competition and
attracts the most innovative players provides the right incentives for growth
SOURCE: McKinsey Global Institute analysis
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Productivity performance differs significantly
across U.S. regions
Productivity levels and growth
New
England
1.7
Rocky
Mountains
Far West
Plains
1.4
1.6
1.3
Mideast
Great Lakes
1.8
1.6
Productivity
growth
Compound
annual growth
rate, 2000-08,
%
Productivity
levels, 2008
$ Thousands
per employee
84
87-88
91
97
Southeast
Southwest
1.2
1.5
SOURCE: U.S. Bureau of Economic Analysis; U.S. Bureau of Labor Statistics; McKinsey Global Institute
102
106
113
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The top 20 U.S. cities account for more than 50% of national
productivity growth and approximately 40% of GDP
Contribution
%
Metropolitan
Statistical Area
New York
Los Angeles
Washington, DC
Dallas
Chicago
Boston
Houston
San Francisco
Philadelphia
San Diego
Portland
Miami
San Jose
Minneapolis
Pittsburgh
Austin
Baltimore
Phoenix
Tampa
Atlanta
Productivity growth,
2000-08
Population,
2008
Millions
GDP, 2008
12.2
6.7
4.1
3.3
2.9
2.6
2.5
2.0
1.9
1.9
1.8
1.7
1.5
1.4
1.2
1.1
1.1
1.1
1.0
Total
53%
0.9
8.1
4.9
2.5
2.3
3.4
2.0
2.4
1.9
2.1
1.2
0.7
1.6
0.8
1.2
0.8
0.6
0.9
1.2
0.8
1.7
Total
41%
Compound annual growth rate, 2000-08
%
Productivity
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
SOURCE: U.S. Bureau of Economic Analysis; U.S. Bureau of Labor Statistics; Moody’s Economy.com;
McKinsey Global Institute
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
GDP
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
Employment
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
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U.S. multinational companies have increased productivity
more than twice as fast as other U.S. private sector firms
Recession years
Labor productivity (real value added per worker)
$ Thousands, 2000
Compound
annual growth
rate, 1990–2007
%
120
110
U.S.
multinational
companies
3.6
All other
companies
1.5
100
90
80
70
60
0
1990
95
2000
05
07
SOURCE: U.S. Bureau of Economic Analysis; U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis
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Top quartile
Opportunities exist for leaders and laggards
25th–50th quartile
Bottom quartile
Contribution to productivity growth
%
Goods
Services
Regulated
and public
Manufacturing
Construction
Natural resources
Computer and electronic products
Real estate and rental and leasing
Wholesale trade
Information
Transportation and warehousing
Retail trade
Administrative and other services
Accommodation and food services
Other services (except public admin.)
Arts, entertainment, and recreation
Finance and insurance
Professional, scientific, technical services
Management of companies
Government
Health care and social assistance
Educational services
Utilities
1990-20001 2000-08
36.7
19.2
-0.5
-11.0
1.6
0.2
n/a
22.5
19.8
18.4
17.5
11.2
7.4
21.6
3.8
3.9
9.8
1.5
-4.7
5.6
-2.8
-3.2
-1.7
-4.8
-0.7
-0.8
16.9
9.9
7.3
9.7
0.7
-0.6
-4.1
1.0
-8.1
-1.7
-1.5
-3.1
2.5
0.5
1 Productivity contribution was calculated using Moody’s Economy.com data.
SOURCE: U.S. Bureau of Economic Analysis; Moody’s Economy.com; MGI Sunrise Productivity Model
Aerospace can further
improve productivity by
continuing to set the
bar for innovation while
making use of standard
lean principles
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
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