Not to mention the red-hot jobs market, which keeps defying economist expectations as new positions are created and filled. There are so many jobs flying around that the Bureau of Labor Statistics recently had to revise higher for the last twomonths.
But make no mistake, there are negative forces pulling the economy down — and one of the primary ones is difficult to feel in real time. That would be productivity, which measures the efficiency of the work done by a company and its employees by comparing output to hours worked.
As it stands now, the major disconnect is this: as companies keep hiring into a hot market, they’re not getting as much out of their workers overall. And that’s fueling a stealth economic slowdown.
The recent decline in productivity can be seen in the chart below. Note that the downward inflection point came at the end of 2021, after which the line declined meaningfully for the first time in more than a decade. Labor productivity has fallen for five straight quarters on a year-over-year basis, the longest such streak on record.
Productivity is important to the economy because it’s the primary input for a population’s standard of living. And it goes well beyond simply getting people to work harder. Increasing productivity also means using technology to improve workflows and overall efficiency, and training existing employees to get the most out of these tools.
Why has it dropped in recent years? Experts like former Treasury Secretary Larry Summers attribute it to less inspired employees that are more likely to participate in trends like “quiet quitting” or “Bare Minimum Monday.”
“There’s a highly empowered workforce that was engaged in a certain amount of quiet quitting,” Summers told the Washington Post in October 2022. He noted that’s resulting in a “certain amount of absenteeism on and off the job” that is probably leading to lower productivity.
Then there’s remote work. While the ability to work from home often only applies to certain white collar professionals, tech titans like Mark Zuckerberg and Marc Benioff have suggested that the rise of remote work is negatively impacting productivity.
Another culprit could be the practice of “labor hoarding,” where employers once desperate for workers during the pandemic are holding onto them despite falling profits. As Insider reported in March, major retailers like Walmart, Target, and Kroger are locked in a labor-hoarding war over hourly employees that’s pushed pay higher. Labor hoarding is especially problematic while an economic downturn is already ongoing precisely because those conditions foster a negative impact on productivity, said BNP Paribas in research from December 2022.
Delaware just became the latest state to legalize recreational marijuana. See a list of every state where cannabis is legal.
In April 2023, Delaware became the latest state to legalize cannabis, pushing the total number of states where adults can legally consume marijuana to 22, along with Washington, DC and Guam.
Last year, legalization votes failed in deep-red South Dakota, North Dakota, and Arkansas. South Dakota previously voted to legalize cannabis in 2018, but the law was struck down in court. Two states — Missouri and Maryland — legalized cannabis through ballot measures in the 2022 elections.
Cannabis is still considered an illegal Schedule I drug by the US government.
This article was first published in January 2018 and has been updated with new information about where cannabis is legal. It was last updated on April 27, 2023. Melia Russell contributed to an earlier version of this story.
Alaska
Adults 21 and over can light up in Alaska. In 2015, the northernmost US state made it legal for residents to use, possess, and transport up to an ounce of marijuana — roughly a sandwich bag full — for recreational use. The first pot shop opened for business in 2016.
Alaska has pounced on the opportunity to make its recreational-pot shops a destination for tourists. More than 2 million people visit Alaska annually and spend $2 billion.
The ballot measure was backed by a number of cannabis giants, including Curaleaf, Cresco, and Harvest Enterprises.
The Arizona Department of Health Services began accepting applications for adult-use licenses on January 19, 2021, and approvals were issued just three days later. Sales began immediately.
Arizona rolled out adult-use sales faster than any other state that voted to pass recreational cannabis in those elections. Companies already operating in the state’s medical market had a first crack at recreational customers.
California
In 1996, California became the first state to legalize medical marijuana. California became even more pot-friendly in 2016 when it made it legal to use and carry up to 1 ounce of marijuana.
The law also permits adults 21 and over to buy up to 8 grams of marijuana concentrates, which are found in edibles, and grow no more than six marijuana plants per household.
Colorado
In Colorado, there are more marijuana dispensaries than Starbucks and McDonald’s combined. The state joined Washington in becoming the first two states to fully legalize the drug in 2012.
Residents and tourists over the age of 21 can buy up to 1 ounce of marijuana or 8 grams of concentrates. Some Colorado counties and cities have passed more restrictive laws.
Connecticut
Delaware
In March 2023, the Delaware Senate passed a pair of bills that would legalize an adult-use cannabis market in the state.
The legislation was expected to receive pushback from Delaware Governor John Carney, who vetoed a legalization bill in 2022. Instead, Carney said in April that while he still has concerns about legalization, he would allow the bills to become law.
House Bill 1 legalizes marijuana use and possession for adults 21 and older in the state but still prohibits individuals from growing cannabis at home or consuming cannabis in public. House Bill 2 creates a framework for a cannabis industry in the state and taps the Division of Alcohol and Tobacco Enforcement to oversee the new market. Recreational cannabis products will have a 15% sales tax and around half of the tax revenue will be earmarked for the Justice Reinvestment Fund, which will be used to “improve quality of life for communities most impacted by the prohibition of marijuana and ‘war on drugs’ era policies.”
Stores aren’t expected to open their doors until August 2024, according to WHYY.
Illinois
Illinois lawmakers in June 2019 passed a bill that legalized the possession and commercial sale of marijuana starting on January 1, 2020.
Gov. J.B. Pritzker, who made marijuana legalization a core component of his campaign for office, signed the bill into law.
Illinois is the one of the few states to legalize marijuana sales through the state legislature, rather than a ballot initiative.
Maine
A ballot initiative in 2016 gave Maine residents the right to possess up to 2.5 ounces of marijuana, more than double the limit in most other states.
Maryland
Voters in Maryland passed cannabis legalization by a large margin, with over 65% in favor, in 2022. The legislation makes the purchase and possession of up to 1.5 ounces of cannabis legal for adults over the age of 21.
Adults will also be allowed to grow up to two cannabis plants at home, and the legislation will remove criminal penalties for marijuana possession of up to 2.5 ounces.
In April 2023, Maryland lawmakers finalized details for the state’s new recreational cannabis market. Starting from July 1, adults 21 and older in the state will be allowed to purchase cannabis from retailers.
Massachusetts
Massachusetts was the first state on the East Coast to legalize marijuana after voters approved the measure in 2016.
Marijuana dispensaries opened their doors to consumers in November 2018. Adults over the age of 21 can purchase up to 1 ounce of marijuana but cannot consume it in public.
Michigan
Voters in Michigan passed Proposition 1 in 2018, making it the first state in the Midwest to legalize the possession and sale of marijuana for adults over the age of 21. Adults can possess up to 2.5 ounces of marijuana, and residents can grow up to 12 plants at home.
Missouri
Missourians voted to legalize cannabis with over 53% in favor. Missouri’s legislation will allow adults over the age of 21 to possess up to three ounces of cannabis, grow six plants at home, and levies a 6% tax on recreational cannabis sales in the state.
That tax revenue will be used to automatically expunge the records of nonviolent marijuana offenders in the state.
Residents and tourists who are 21 and over can buy 1 ounce of marijuana or one-eighth of an ounce of edibles or concentrates in Nevada.
There’s bad news if you want to grow your own bud, though. Nevada residents must live 25 miles outside the nearest dispensary to be eligible for a grower’s license.
New Jersey
New Jersey in 2020 voted to legalize recreational marijuana for adults 21 and older, opening a market that could near $1 billion.
In February 2021, Gov. Phil Murphy signed the legalization legislation, after months of back-and-forth arguments about criminal penalties for minors possessing marijuana and the proper way to set up a licensing framework for cannabis sales in the state, among other details.
Cannabis shops opened their doors in the Garden State this year.
New Mexico
Gov. Michelle Lujan Grisham signed the state’s legalization bill in April, after convening a special session of the legislature to hammer out the details.
The law took effect June 29 — allowing state residents to possess and consume marijuana — and recreational started on April 1.
Oregon
Oregon legalized marijuana in 2015, and sales in the state started October 1 of that year.
Rhode Island
Rhode Island Gov. Dan McKee signed legal marijuana into law on Wednesday May 25, though it will be a few months before cannabis shops are allowed to open. The law includes expungement of past cannabis convictions.
Vermont
Vermont became the first state to legalize marijuana through the legislature, rather than a ballot initiative, when Republican Gov. Phil Scott signed a bill into law in January 2018.
Adults in the Green Mountain State can carry up to 1 ounce of marijuana and grow no more than two plants for recreational use. The law went into effect in July 2018. But it was limited in scope. It didn’t establish a legal market for the production and sale of the drug.
In 2020, the state legislature passed a bill that would allow for adult-use sales in the state. All localities must opt-in to allow for dispensaries, however.
Retail cannabis sales began in Vermont earlier this year.
Virginia
A majority of state legislators in Virginia approved Gov. Ralph Northam’s suggestion to legalize the consumption, possession, and cultivation of marijuana on July 1, years earlier than the initial legislation intended.
Washington
Marijuana was legalized for recreational use in Washington in 2012.
The state allows people to carry up to 1 ounce of marijuana, but they must use the drug for medicinal purposes to be eligible for a grower’s license.
Washington, DC
Residents in the nation’s capital voted overwhelmingly to legalize marijuana for adult use in November 2014.
The bill took effect in 2015, allowing people to possess 2 ounces or less of marijuana and “gift” up to an ounce, if neither money nor goods or services are exchanged.
24/24 SLIDES
Productivity did see a brief surge in the post-COVID period as people anxious to get back to work filled vacant jobs and put in the hours. But despite some hopes that the pandemic-era gains would be permanent, they proved unsustainable, leading to the situation we’re in today.
Given how difficult it is to pin down one specific reason for the productivity slowdown, it’s similarly tough to know what can turn things around. But a growing chorus of experts think they have an idea.
The impact of AI
The most obvious counterpoint to the ongoing productivity slowdown is the torrid rise of artificial intelligence tools. Led by OpenAI’s ChatGPT phenomenon, there’s been a sudden surge of interest — and investment — in the space. It’s kicked off a veritable arms race between the mega-cap tech elite.
A recent study from Stanford and MIT found that workers at a Fortune 500 software company who were given generative AI tools got 14% more productive. Those gains approached 30% for the least experienced workers.
Further, Goldman Sachs recently predicted that AI’s positive impact on productivity could drive profit growth — and, by extension, the stock market — higher over the next 10 years. The firm even went as far as to say AI-driven productivity could help keep the S&P 500 charted on its long-term upward course.
This positive impact on productivity, however, has not started showing up in data yet. In the meantime, the decline in productivity is setting off alarm bells for the economy.
