Why Was US Labour Productivity Growth So High During the COVID-19 Pandemic? The Role of Labour Composition

In the first few weeks of the COVID-19 recession, around 20 million US workers lost their jobs, with half of those losses occurring in the last two weeks of March 2020. On the tail of these unprecedented job losses, labour productivity grew at an annualized rate of 10.3 per cent in 2020Q2 and the average hourly wage increased sharply. This study examines how these phenomena are related. Because most of the job losses were in lowwage industries or among low-wage workers in high wage industries, the average skill level of the labour force increased substantially. This study finds that this increase in average skill level accounted for 71 per cent (7.3 percentage points) of labour productivity growth in 2020Q2, and that about one-third of the increase in average skill level was due to the change in the distribution of workers across major industries, mainly because of the massive job losses in leisure and hospitality and other low-wage industries. Altogether, changes in the distribution of workers across major industries accounted for 24 per cent (2.5 percentage points) of the 10.3 per cent increase in labour productivity