Our economy has an increasing trend, but within one economic cycle, the economy experiences contraction and expansion. Currently, many countries are worried about the productivity slowdown. I think that productivity may have a similar cycle and trend.
Firstly, productivity has an increasing trend as new technology improvement and innovation and invention will lead our productivity to grow in the long term. Secondly, we can have productivity increase and decrease in the short term, which I call a productivity cycle.
It is easy to explain the increase during a productivity cycle. Such increase is led by an improvement of technology and applying new technologies. Such technology improvement may even create new jobs. For example, once alternative energy has been introduced, the proportion of employment in the energy sector has increased to a large extent and overtaken some traditional energy industries already. However, once the productivity increases upon a certain level, such increase will slow down and even decline. Technological improvement is also possible to reduce the number of jobs, as when productivity increases, more outputs will be produced, then there is a probability of oversupply in the economy. Therefore, companies will either choose to cut their jobs or slow down their technology improvement process. Under huge social pressure, companies will be more likely to choose to slow down their technology improvement process. Such slowdown will cause productivity slowdown. Such decline is not endless, it will be stopped by new technology and new invention, which can create new jobs and allow some jobs to be moved to new industries from the traditional industries.
Therefore, a productivity cycle may exist and be supported by continuous innovation and invention.
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