issues because in the absence of a means of measuring its output, most national account systems
simply assume that output changes in line with the labor input, an assumption that labor
productivity is constant over time.17 Other services is a heterogeneous collection of industries
such as medical care, business services and personal services, where reliable measures of output
and prices are largely unavailable. Thus, the estimate of TFP provides some insight into the
severity of the measurement issues. A finding of a sustained negative trend in TFP is suggestive
of potential measurement problems.
A projection of future trends in labor productivity and TFP remains very difficult. The
service-producing sectors are still in a state of disequilibrium following the financial crisis with a
negative reported rate of TFP change. It also seems evident that agriculture still accounts for a
substantial level of underemployment; so that fast growth in the other sectors will draw workers
out of agriculture and contribute to a positive rate of TFP change within agriculture. In future
research, it would be useful to disaggregate the service-producing sector to exclude the highly
capital intensive sector of homeownership and to focus more directly on the problems of finance.
It is also likely that many services industries, such as public administration, display constant
labor productivity by assumption.
The procedures used to compute the growth accounts for these industries are identical to
those used previously for the sectors. The ratio of total employment to employees from the LFS
is used to adjust the official data on labor compensation. The LFS is also the source of the
employment data and the measure of years of schooling.
A summary of the growth accounts is provided in table 10. In the years prior to the
financial crisis, the services sector experienced strong growth in labor productivity (4.5 percent
annually for services less housing) and decent gains in TFP (1.2 percent annually). The growth
in labor productivity were large in transportation, trade and finance: but significant gains in TFP
were limited to transportation and finance: the rate of increase in TFP for the banking, insurance,
and real estate industry averaged a spectacular 6.8 percent over the 1980-96 period. Except for
public administration, all of the industries show large contributions from capital. As anticipated