Marketplace - Why higher productivity doesn't equal wage growth

Episode Date: February 2, 2026

Productivity — the rate at which companies make what they make, or do what they do — has been a reliably bright spot in this economy. But wage growth hasn’t kept up. In this episode, what’s hampering compensation growth while overall productivity rises at a clip? Plus: Is AI actually to blame for recent layoffs? Is rising global debt bad news? And, the partial government shutdown will delay crucial employment data.Every story has an economic angle. Want some in your inbox? Subscribe to our daily or weekly newsletter.Marketplace is more than a radio show. Check out our original reporting and financial literacy content at marketplace.org — and consider making an investment in our future.

Are you ready for a life-changing opportunity? BC Cancer is actively hiring for all health care roles across all its regional centers in beautiful British Columbia. Join a dedicated team committed to ending cancer for good. And experience the lifestyle you've always dreamed of in stunning BC. We're curing cancer here. Are you in? Apply now at jobs.bcancor.bcancor.bc.c.c.c.c.c.a. shoe on this bold question from dentine gum. Is it ever okay to compliment a millennial on their skinny jeans?

In 2026? Dentine, chew bold. Remember what happened to economic data the last time the government shut down? Yeah, that again. From American public media, this is Marketplace. In Los Angeles, I'm Kai. Rosdahl, it is Monday. Today, this one is the second of February. If you can believe that, it is good as always to have you along, everybody. We're going to give you the bureaucratic language

first, then we're going to do our best to tell you what it's going to mean. Due to the partial federal government shutdown, read the email that Marketplaces Carla Javier got from the Bureau of Labor Statistics this morning, the BLS will suspend data collection, processing, and dissemination, end of quote. Sadly, for those of us whose job it is to know what is going on in this economy, especially at this low, higher, low-fire moment, what's going on in the labor market. That means we are not going to get the December job openings and labor turnover survey that was supposed to come out tomorrow. Jolts is what we call that. And also probably we're not going to get the biggie, the January unemployment report that was due on Friday. All of that said, though,

and on the theory that we're going to get the data eventually, Carla made some calls to see what people are going to be looking for whenever. Not only will these data show what's been going on in the job market recently, they'll also update the understanding of the past year through a process called benchmark revisions, says Daniel Jow at the job site Glass Door. We might get a very different picture of 2025 in hindsight where the job market was actually much slower than we originally thought and thus much closer to stall speed. Whenever these jobs numbers are released, he'll be looking closely at health care.

It's been the pillar of jobs growth over the last year or two years. And so any slowdown we see in the healthcare industry is concerning. The latest reads showed a labor market that overall is stagnant. Laura Ulrich at the Indeed Hiring Lab says she doesn't see anything in its internal data that makes her think there will be big swings. I'm expecting to still see hires rates low, quits rates low. The layoff number, though, will be interesting because we have seen more, at least media reports of layoffs, but not an increase really in unemployment claims. If the jobs report is delayed by a day or two, that wouldn't be a big deal, says Jesse Rothstein at the University of California, Berkeley.

But if the shutdown drags on again and the data gets tangled up in it, again, he says, It means that we're flying blind, that we don't really have up-to-date information on how the labor market is doing. At a time when we're already flying kind of half-blind because of the effects of the October shutdown, and at a time when the labor market seems to be teetering on an edge, and it's not clear if or when it's falling off that ledge. And if these data delays and disruptions become the new normal, he says that can make the picture of the labor market even fuzzier and harder to react to. I'm Carla Javier for Marketplace. It wasn't anything fuzzy at all on Wall Street today. We will have the details when we do the numbers.

You know by now that President Trump has made his pick to replace Jay Powell when Powell's term as Fed chair is up in May. We did talk a bit on Friday about who Kevin Warsh is and what a Warsh Fed might look like. But there have been 16 chairs before Warsh over the course of this institution's 112 years. You're going to have to live with those. fact that forecasts have a range of uncertainty. Irrational exuberance. In my opening remarks, I'd like to briefly first review today's policy decision. But first, I'll review recent economic developments in the outlook.

And we are well positioned to wait to see how the economy evolves. Extra points, if you can identify all those voices. But our point is that sharing the Federal Reserve is arguably the most powerful job in this economy, which means the process for how we get new ones. matters. So we've called three historians to talk about that process and how it normally works. Yeah, I mean, there's a boring legal answer, which is the president picks somebody as a nominee and a Senate vets that person through advice and consent to confirm the nominee. And after the confirmation, then bada bim, bada boom, we have a Fed chair.

Bada bada boom, Peter Kati Brown is an associate professor of financial regulation at the Wharton School at the University of Pennsylvania. More interesting answer is a little bit like a selection of a We've got the president and his advisors gathering mostly in quiet. And, you know, the rest of us on the outside, we parse some tea leaves and look for the white smoke until the nominee is announced. And some presidents have chosen to reappoint the Fed chairs they inherited from their predecessors, even if they were from the other political party. That's Eric Hilt, Professor of Economics at Wellesley. And just a review here. President Reagan reappointed Paul Volker, who was originally nominated by Carter.

President Clinton reappointed Greenspan, who was originally nominated by Reagan. President Obama reappointed Bernanke, who was originally nominated by George W. Bush, and President Biden reappointed Powell, who, lest you had forgotten, was nominated by President Trump. That is decades of Fed appointments, during which the Pied. politics of this economy became more and more front and center. There's been really this increasing movement of the Fed into the public eye, both because of the economic turmoil we've gone through and because of the way that politics in general has become more and more of sort of a spectacle and even a zone of entertainment for many.

That's Jennifer Burns. She's a professor of history at Stanford, the third member of our panel today. Entertainment might be too strong a word for it, but the selection of a Fed chair, always important, has under President Trump become something of an economic spectacle? A kind of celebrity apprentice sweepstakes. But there's no doubt that the process is one that invites a lot of active speculation watching just because the Fed chair is the dominant economic policymaker in the United States. Part of the reason for that dominance is that the incumbent and the institution are also independent. And we've seen what has to be. We've seen what has to be happens when that breaks down. So one of the most significant examples of a new Fed chair being chosen

by the president and marking sort of a dramatic shift in Fed policy is President Nixon's choice of Arthur Burns. Arthur Burns was someone who had known President Richard Nixon through various phases of his career. And putting him at the Fed was Nixon's effort to draw the Fed much, much closer to presidential prerogatives. Burns became chair in 1970. By 1970, by 1974, inflation was above 11%. But under Burns, the Fed was unwilling to adopt the painful measures that were probably necessary to bring inflation under control. Which had the unfortunate effect of really helping inflation become more entrenched in the economy and more sustained. So entrenched, in fact, that after President Carter put Paul Volker in the job in 1979,

Volker pushed interest rates to 20% to get inflation down. That's a decision I asked Carter about decades later. Well, you know, I was the one that suffered politically, and Ronald Reagan was the one that benefited from the Paul Volcker economic philosophy. One president's thoughts on the importance of Federal Reserve independence, though, are another president's vague guidelines, I guess you could say. Another example of this was the one that – it was the dog that didn't bark. George H.W. Bush made quite a show of antagonizing the Fed during the 1988 presidential election

and really viewing Alan Greenspan as keeping interest rates too high. In 1991, with the federal funds rate around 7%, President Bush actually called it out in his state of the union. Interest rates should be lower now. It's a dog that didn't bark, though, because Who did he nominate when he had his one choice as Fed chair? He re-nominated Alan Greenspan, the person that he seemed to be, you know, most skeptical of. That was then. This is now.

Today, the Federal Reserve is more important in economic policymaking than it ever was. We've had the Great Recession and COVID, which solidified the Fed's role as the lender of last resort. And now we've got a president who believes and is not afraid to say that he should have a role in setting interest rates. I think it's different in that the pressure campaign is very public. I'd love to get the guy currently in there out right now. Not only has President Trump threatened to fire the sitting Fed share and berated him for not lowering interest rates more. The head of the Federal Reserve is a stiff. The Department of Justice has launched a criminal investigation into Jay Powell and the central bank that smacks of politics.

So we've never seen anything like what Donald Trump has done in the previous year to the Federal Reserve, which is an out and out assault on its independence. And therefore, we've never seen anything like a nomination coming out of the context of this assault. The Federal Reserve System has hundreds of economists on staff. Seven members of the Board of Governors, 12 regional bank presidents. And all of those people are mandated by Congress in the Federal Reserve Act to balance stable prices and maximum employment.

If we get a situation where the Federal Reserve is just looking to the Oval Office for the direction on interest. rates, well, that's an experiment that has been run many times before, just not in the United States. And the result is hyperinflation. Turkey, Argentina, Zimbabwe, all of them places where inflation got way out of control because politics got in the way of monetary policy. And that's why the stakes are so high. As they say, with great power comes great responsibility, but also comes great political risks.

You know, you can't see the grimace on my face right now. I'm very worried about how this is going to go. I think that if history teaches us anything, it's that having an independent Fed, and nonpartisan independent Fed chair is very important and very valuable economically. And I fear that we may lose that. So here's where things stand in this economy today. Inflation has come down a lot from its highs, but it is still meaningfully above the Fed's 2% target.

We've got tariffs, as you know. We've got a lot of questions about AI. a labor market that the Fed believes is cooling down and a whole lot of fiscal policy uncertainty. That is the job the next Fed chair inherits. Thanks once again to Jennifer Burns at Stanford. Peter Conti Brown at Wharton and Eric Hilt at Wellesley. Speaking of the labor market, as Carla Javier was just a minute ago, layoffs are making headlines again.

Amazon, UPS, Pinterest, also Dow, the chemical company. They've all announced job cuts in the past week. several of them saying artificial intelligence was one of the proximate causes. But honestly, what does it even mean when companies say they're letting people go because of AI? Marketplaces Samantha Fields asked around. Every time Molly Kinder at the Brookings Institution hears a company attribute layoffs to AI, she's skeptical. Our best labor market data show that we're really actually not seeing much of an impact yet on the labor force. There's no real proof that the much talked about.

much feared AI apocalypse is here. It's certainly true that some companies have to invest a lot of capital in the infrastructure behind AI, which has, in some cases, force them to cut costs in other areas. That's not the same thing as AI being good enough to take people's jobs, though. But Sarah Myers-West at the AI Now Institute says pinning layoffs on AI sounds good to investors. I think it's a way for companies to look like they're being really innovative while sort of stepping back over investment or they need to trim their books or there might be a variety of other reasons why they need to make layoffs.

None of those reasons seem quite as positive as AI. Lawrence Schmidt at MIT's Sloan School of Management says there are some jobs AI can do. But in many instances, it will change what we are doing rather than eliminate the job entirely. In the short term, Molly Kinder at Brookings says we are probably overestimated. how many jobs are vulnerable to AI. But we're probably underestimating how transformative will be in the medium to long term.

When I look out five to ten years, I think we're going to be seeing a lot more impact on jobs. And she says we need to be doing more to prepare. I'm Samantha Fields for Marketplace. Coming up. Economists would say that productivity is the elixir for our overall output growth. But does that magic potion have its limits?

First, though, let's do the numbers. Down industrial's up 515 points on this Monday. That's 1% 49,407. The NASDAQ rose 130 points, about 610%. Finished at 23,592. S&P 500 climbed 37 points, about a half percent, 69 and 76. Disney made a record $10 billion in revenue last quarter, and that's just in its experiences division, think theme parks and cruises.

Ticket sales were indeed. up at U.S. parks, but those parks saw fewer international visitors. I wonder why that is. A new chief executive is expected to be announced soon for the entertainment company if Bob Eiger decides. So the Walt Disney Company plummeted 7.4% on the day. Golden Silver prices continued their slide, although not quite as dramatically as Friday. Gold down about 4%. Silver dropped about 6%. Bonds down yield on the 10-year T-note 4.29% you're listening to Marketplace. chew on this bold question from dentine gum is it ever okay to compliment a millennial on their skinny jeans in 2026 dentine chew bold this is marketplace i'm kai risdall the thing about the economy i'm talking personal

national and in this specific case global economies is that they run on debt credit leverage borrowing money to get things done. The tricky thing about that debt, though, is that it can kind of get away from itself. The more you have and the less you pay down, the more overwhelming it gets. Obvious, perhaps, but critical, because according to the International Monetary Fund, global public debt, that is debt held by governments, is projected to exceed 100% of global GDP. That is to say, the entire global economy, by the end of the decade, the highest that level has been since 1948. So we've gotten Terris and Claire on the phone to talk things over. She's a professor of economics at George Washington University. Professor Sinclair, welcome back to the program. That's great to be back. Let's deal with the facts on the

ground as we have them. Global public debt, sovereign debt, is high. It is rising. Is that a bad thing? And if so, why? Well, so as I'm an economist, I have two hands. And so there's at least two perspectives on this. But let's break it down and kind of zoom in on kind of both the pessimists, side as well as the optimist. So from the pessimist side, debt can't rise forever. And so when we see these public debts rising, that's a concern if we don't see a clear pattern of future stabilization. But it's also the case that when people are looking at where public debt is today, really the question is, what is that money being spent on? And is it crowding out private sector spending that could otherwise be a better outcome for global society.

Let me take the second half of that answer then and the crowding out thing. Is it crowding out? And what's the effect of, you know, some guy in Sheboygan trying to, you know, make interest payments on his car or his house or whatever and this rising global public debt? Yeah, well, I think the guy in Sheboygan might be really concerned about this because it may explain some of the rise and interest rates that people have seen and the affordability of various large ticket items where they might be borrowing from banks. And one way to think about this is just we've got these two big players, the U.S. and China, and they're both looking to borrow heavily and they're competing for that same pool of global savings. And that's going to affect interest

rates around the world, even in Chiboyan. Even in Chaboygan. Lovely town as it is. is it do you suppose too late and i guess we have to frame this two ways one is for the united states which is you know obviously the world's biggest economy but also you know we're paying a trillion dollars a year in interest on our debt um so is it too late for the united states turn things around and then globally you know are we at the tipping point of of the debt trap here well so i think this is where things get a little more interesting because on the on the one hand we are facing massive demographic shifts. And that does point to some concerning patterns

and a potential tipping point because we're looking at a world where we're going to be trying to support a larger global population of a smaller workforce. And that's going to be difficult to do. But on the other hand, you know, we may also be at a point where, you know, AI and other sources of productivity

may help us and may be able to offset that. No pressure here, but you're doing a whole lot of on the one hand, on the other hand here, Professor Sinclair. Yes, the classic economist problem. But I think it's important to really keep in mind that we're looking at a world where we tend to have these really big doomsayers. Like, you know, at any moment we're going to have this giant fiscal crisis. Whereas on the other side, then there are people who are like, oh, okay, it's actually fine. You know, if we look at it from the perspective, for example, of global wealth,

rather than as, you know, so debt to wealth as compared to debt to GDP, things maybe don't look so bad. Let me just pick up on that where you use crisis. You know, one of the things that that has boosted, certainly U.S. debt and global debt to some degree in the last decade and a half or so, almost 20 years now since a financial crisis, has been huge government expenditure in times of dire economic crisis. And one does imagine that there's a limit to how much a government can do as its debt load piles up no matter how bad the situation gets.

Right, for sure. I mean, I think that's really where we're, one of the key concerns that we have is that even if it's not a financial crisis that kicks off our next concern, it may be that we have some other economic shock that hits the economy, and then it's followed by another financial crisis because there's limited room for additional borrowing on the part of governments may make a follow on crisis for. any other impact on the economy. Terris Sinclair, she's a professor of economics, also the chair of the department at George Washington University. Professor Sinclair, thanks for your time. Appreciate it. Thank you. Surveying the broad reach of this economy the past couple of years, one of the brightest spots

that catches the eye is labor productivity, how much stuff we make and do in each hour that we spend making and doing it. Productivity, in fact, has been growing faster than it has historically. which has plenty of upside. Higher productivity can generate higher profits. It can help businesses keep prices down, and it can let them raise wages. But even though productivity growth has been strong,

wage growth has been slowing. What's up with that, you ask? Here's Marketplace's Justin Ho. If you're a business owner and your workforce becomes, say, twice as productive, that means it can finish a day's work in half the amount of time. You could send them home, or you could have them make or do them,

more stuff so the business can make more money. That's exactly where economists would say that productivity is the elixir for overall output growth. That's Nicole Servi, an economist with Wells Fargo. She says more productive businesses can use that extra money to grow, to buy new equipment, maybe open a new location, and if you have stronger profitability because you're producing more per hour worked, you could turn around and reward your workers by giving them higher wages. But higher productivity, doesn't always mean higher wages. Ben Zipperer, senior economist at the Economic Policy Institute, says ever since the 1980s, wage growth has been held back by de-unionization and too much

unemployment. When there's more people trying to find a job, that means that employers don't have to work as hard to find workers, and that puts downward pressure on hourly pay. And Zipperer says that's why wage growth hasn't kept up with productivity growth. Workers are almost producing twice as much as they used to produce. in real terms since 1980 or 1979, whereas hourly pay basically grew by only a third of that. That gap started to narrow again after the pandemic. Demand for workers picked up, and that encouraged them to find better jobs, which in turn

increased both productivity and wages. Those productivity enhancements allowed companies to pay much higher wages, but they also got something for paying higher wages. that means a stable and better suited workforce that is more productive. More recently, as productivity has grown, companies haven't been as eager to raise pay. Nicole Servi at Wells Fargoes says companies have been spending more on equipment and tariffs. And so I think what we're seeing is that the worker is not being prioritized right now in terms of those productivity gains. Companies are nervous about spending money on anything right now, says Courtney Schupert, an economist with macro policy perspectives.

If you're uncertain about your business environment or what demand is going to look like, maybe you hold off on passing along some of those profit increases, in part just to protect margins. But Schubert says the big factor holding back wage growth is the weakening labor market. Companies are holding off on hiring. Some are laying off thousands of workers. People aren't quitting their jobs as often. So workers have less leverage. Workers, you know, were able to demand a higher wage a few years ago when there was such a turn in the law. labor market, and now that balance has shifted. It's certainly possible to have a productive and growing economy, even if the benefits are not widely shared, says Ben Zipperer at the Economic Policy Institute. That has been the experience of the United States, you know, over the last, you know,

for or so decades. But Zipperer says the post-pandemic economy taught us that it's also possible for companies to share those benefits with their workers. I'm Justin Howe for Marketplace. This final note on the way out today in which this program is going to get ahead of the inevitable swarm of Super Bowl-related stories as the week goes on. Saw this in the Wall Street Journal that avocado prices were down 19% in December over a year ago. You know where this is going, right? Data comes from the market research company, Sarkana.

Here is the mind-blowing data point. We are set to have imported around 290. million pounds of avocados from Mexico in the four weeks leading up to the game on Sunday. You want guac. You gotta have avocados. 290 million pounds. Amir Babawi, Caitlin Esh, John Gordon, Oyer-Yer-Car and Stephanie Seeker on the marketplace. Edding staff, Kelly Silvera, is the news director.

I have no idea how any of them feel about guacamole. I'm Kyle. Rizdahl. We will see you tomorrow, everybody. This is 8 p.m. Ready to make the most of your money? Sign up to receive weekly tips from Marketplace designed to help you make smarter financial decisions. Plus, you'll also be the first to know about exclusive Marketplace merchandise and local events. Text Marketplace to 80568 to sign up.