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Growth and renewal in the U.S.: Retooling America’s economic engine

Growth and renewal in the U.S.: Retooling America’s economic engine. McKinsey Global Institute. February 2011. CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of McKinsey & Company is strictly prohibited.

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Growth and renewal in the U.S.: Retooling America’s economic engine

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  1. Growth and renewalin the U.S.: Retooling America’s economic engine McKinsey Global Institute February 2011 CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of McKinsey & Company is strictly prohibited

  2. 8.4 million jobs lost from peak-to-trough (Dec. 2007 to Dec. 2009) • 1.1 million net job gains since the start of 2010 (Jan. 2010 through Dec. 2010) • U.S. employment today (Dec. 2010) is 7.2 million jobs below peak of December 2007 The U.S. job market has lost more than twice as many jobsas in previous downturns Decline from peak U.S. employment1 Percentage from peak month prior to recession • June 1990-Jan. 1993 • July 1974-Jan. 1976 • March-Nov.1980 • Feb. 2001-Jan. 2005 • July 1981-Oct. 1983 • Dec. 2007-Dec. 20102 • 0 • 6 • 12 • 18 • 24 • 30 • 36 • 42 • Months since employment peak 1 Total non-farm employment, seasonally adjusted 2 Preliminary numbers subject to change SOURCE: U.S. Bureau of Labor Statistics

  3. The U.S. needs to create 200,000 jobs per month until mid-2017– a feat not seen since the 1980s • Full employment reached in Q2 2017 Number of months1 required to bring back unemployment rate below 5.0%2 Average job growth during major expansions • Months to close the gap • # of months Thousands per month 1961 to 1969 122 1975 to 1980 240 1983 to 1990 211 1991 to 2001 166 2002 to 2007 139 • 0 • 150 • 200 • 250 • 300 • 350 • 400 • Number of jobs created per month • In thousands 1 Projections based on current labor force statistics as of Jan 2011 with unemployment rate of 9.0% 2 Growth in labor force is average between Moody’s Analytics and Global Insight; Assumes participation of approximately 65% SOURCE: Bureau of Labor Statistics; NBER; Moody’s Analytics; Global Insight; McKinsey Global Institute 2

  4. s • -6 • -4 • -6 • -12 After decades of growth, deleveraging has begun • Change • P.p. of GDP • Government • Non-financial business • U.S. debt1 by sector, 1952-Q3 2010 • Percent of GDP • 2000-08 • 2008-10 • Households • 74 • 287 • Financial institutions • 16 • 17 • 220 • 204 • 13 • 154 • 29 • 91 • 69 • 59 • 49 • 45 • 41 • 15 • 24 • 16 • 1980 • 1990 • 2000 • Q3-10 1 Includes all instruments that constitute direct credit market borrowing (includes all bond market borrowing and commercial paper); asset-backed securities have been removed from financial sector borrowing to avoid double counting of the underlying loan. Due to a reclassification of GSE MBS in Q1 2010 we have estimated the amount outstanding of GSE MBS in that quarter. SOURCE: Federal Reserve Flow of Funds; SIFMA; McKinsey Global Institute analysis

  5. 74% 63% 43% A decline in long-term trend growth could be far more damaging to U.S. wealth and job creation than even a severe double dip recession • U.S. GDP to 2030 under various scenarios • Billions of chained 2005 dollars • Cumulativeincrease • Trend based on historicalrates of growth • Double dip recession,then trend • Growth that is 1 percentagepoint below trend • 2010 • 2015 • 2020 • 2025 • 2030 Notes: Historical rate of growth for 1990-2008 is 2.8%; double dip recession assumes GDP declines 1% in 2011, is stagnant in 2012, and trend thereafter SOURCE: U.S. Bureau of Economic Analysis; CMU scenarios; Moody’s Economy.com; MGI analysis

  6. Primary focus of today's discussion Rebalance through deleveraging Tackle unemployment Retool America’s productivity engine Revive U.S. competitiveness Future of R&D and advanced industries MGI’s current work tackles the two horizons to sustained growth and renewal in the United States Overcome the drag from recession . . . . . . And reignite growth and renewal of the economy Other new and ongoing efforts…

  7. The Productivity Imperative • Productivity growth matters . . .

  8. More than ever before, the U.S. now relies on productivity gains for GDP growth Contributions to growth in real U.S. GDP, overall economy Share of compound annual growth rate, 1960-2008, % 100% = 4.1 3.1 3.2 3.3 2.1 2.2 • Increases in • value added • per worker • (productivity) 35 47 53 54 77 80 • Increases in • the workforce • (labor inputs) 1960s 1970s 1980s 1990s 2000s1 • 2010-20E 1 2000-08 data used for 2000s SOURCE: U.S. Bureau of Economic Analysis; U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis

  9. t Forecast Without a productivity boost, younger generations will experience slower increases in their standard of living 1960 40-year growth in per capita GDP Multiplier Birth year 1970 Improvement in per capita GDP by year of birth1 Indexed to 100 1970 forecast 1980 260 2.54x 1960 1980 forecast 240 1990 2.04x 220 1990 forecast 1970 2000 1.96x 200 1980 2000 forecast 1.78x 180 1990 1.63x 160 2000 140 120 100 Years from birth 1 GDP data for 2010–15 is based on McKinsey and Moody’s consensus projections. Thereafter, we assume 1.7 percent productivity growth in line with the historical rate. The share of the working-age population will decline with UN projections (66 percent in 2009; 60 percent in 2030) SOURCE: U.S. Bureau of Economic Analysis; U.S. Census Bureau; Moody’s Economy.com; McKinsey analysis

  10. 2.2 The productivity gains needed to sustain historic GDP growth rates are ambitious Productivity growth rates Compound annual growth rate, % 2000s1 1990s 1980s 1970s 1960s 2.1 2.3 Productivity gain required . . . to sustain historical 1.7% GDP per capita growth to sustain historical 2.8% GDP growth 1 Includes 2000-08 SOURCE: U.S. Bureau of Economic Analysis; Census 2009 population estimates; McKinsey Global Institute analysis

  11. 8 Many advanced economies face a similar productivity imperative GDP (PPP) growth decomposition Compound annual growth rate, 1991–2008, % Productivity increase required % 34 United States • 0.6 • 0.6 59 • 0.8 • 0.8 EU-15 • 1.4 • -0.1 81 • 1.0 • 1.0 Japan • 1.2 • -1.0 • 0.9 • 0.9 11 China • Growth of working-age population, 2010-20 • Historic productivity growth, 1990-2008 • Required acceleration in productivity • Historic GDP growth, 1990-2008 SOURCE: U.S. Bureau of Economic Analysis; Census 2009 population estimates; The Conference Board;United Nations Population Division; McKinsey Global Institute analysis

  12. At the national level, productivity correlates closely with competitiveness Correlation between productivity and competitiveness for a sample of countries Global competitiveness score, 2008-09 Labor productivity, 2008 GDP at purchasing power parity (PPP), per worker, $ Thousands SOURCE: World Economic Forum, Global competitiveness report 2008-09; The Conference Board

  13. Productivity growth matters . . . The Productivity Imperative • Productivity growth is not a job-killer and not just about efficiency – value-added growth and innovation matters more

  14. At the national level, the “trade-off” between aggregate employment and productivity levels is at best short-term . . . Rolling periods of employment and productivity change, 1929-2009 %; periods • 80 • 78 • 76 • 71 • Declining employment and productivity • 1 • 3 • 4 • 5 • 3 • Increasing employment and decreasing productivity • Declining employment and increasing productivity • 99 • 89 • 77 • Increasing employment and productivity • 69 • Annual • Three-year periods • Five-year periods • Ten-year periods SOURCE: U.S. Bureau of Economic Analysis; McKinsey Global Institute Analysis

  15. 7 • 11% • 71% • Percent of total • In the United States, every point of GDP growth creates between 500,000 and 750,000 jobs • 10% • 7% . . . And even in the short term, employment growth has been positively related to productivity, but with a time lag Annual change, 1947-2010 % • Growth in U.S. employment two quarters afterproductivity growth • In 71% of quarters since 1947, productivity growth was followed by employment growth • Only in 7% of periods did employment decline after productivity growth • Growth in labor productivity two quarters earlier SOURCE: U.S. Bureau of Economic Analysis; Bureau of Labor Statistics; McKinsey Global Institute Analysis

  16. Total productivity growth 1990-2000 was 1.8 percent Productivity gains were driven by sectors that experienced positive employment growth and increasing value added growth In the 1990s, productivity growth was driven by a virtuous cycle of increasing value added and jobs growth Compound annual growth rate, 1990-2000 % Size represents productivity contribution1 Employment growth Negative Positive • Administration • Education • Construction • Arts/recreation • Realestate • Healthcare • Professional services • Transport • Information • Otherservices • Government • Wholesale • Management • Retail • Agriculture and mining • Manufacturing • Finance/insurance • Utilities • Accommodation/ food services • -3 • -2 • -1 • 0 • 1 • 2 • 3 • 4 • 5 • 6 • 7 • 16 • 17 Value-added growth2 1 Productivity contribution calculated using Moody’s Economy.com data 2 Valued-added growth is the contribution of each sector to total GDP growth SOURCE: U.S. Bureau of Economic Analysis; Moody’s Economy.com; McKinsey Global InstituteSunrise Productivity Model

  17. 6 Total productivity growth 2000-08 was 1.6 percent Large share of productivity gains came from tradable sectors with large efficiency gains and job losses Since 2000, the largest contributions to productivity gainswere driven by declining employment Compound annual growth rate, 2000-08 % Size represents productivity contribution1 Employment growth Negative Positive • Accommodation/ food services • Arts/recreation • Education • Real estate • Construction • Health care • Manage-ment • Professional services • Govt. • Finance/insurance • Retail • Other services • Wholesale • Utilities • Transport • Agriculture and mining • Administration • Information • Manufacturing • Computers/ electronics • -3 • -2 • -1 • 0 • 1 • 2 • 3 • 4 • 5 • 6 • 7 • 16 • 17 Value-added growth2 1 Manufacturing sector excluding Computers/electronics and Other transportation equipment sectors 2 Valued-added growth is the contribution of each sector to total GDP growth SOURCE: U.S. Bureau of Economic Analysis; Moody’s Economy.com; McKinsey Global InstituteSunrise Productivity Model

  18. Productivity growth matters . . . The Productivity Imperative • Productivity growth is not a job-killer and not just about efficiency – value-added growth and innovation matters more • There are productivity opportunities for laggards AND leaders

  19. 7 • The top five contributors accounted for nearly 75% of total positive productivity growth and 35% of GDP • 1 • 5 • 10 • 13 • 6 • 8 • 8 • 3 • 3 • 6 • 13 • 7 • 1 • 3 • 2 • 4 The top five sector contributors had a disproportionate impacton total productivity growth between 2000 and 2008 Contributions to labor productivity growth1 Compound annual growth rate, 2000-08, % • Share of GDP • % of total • Positive contributors to productivity growth • Computers/electronics • Information • Manufacturing • Real estate • Wholesale • Finance/insurance • Professional services • Administration • Transport • Retail • Government • Health care • Negative contributors to productivity growth • Education • Accommodation/food services • Other services • Construction • Total productivity growth • 1.6 1 Excludes sectors with contributions with an absolute value of less than 0.015%. Numbers may not sum due to rounding. SOURCE: U.S. Bureau of Economic Analysis; U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis

  20. Productivity growth matters . . . The Productivity Imperative • Productivity growth is not a job-killer and not just about efficiency – value-added growth and innovation matters more • There are productivity opportunities for laggards AND leaders • The U.S. can meet the challenge, but a broad productivity agenda is required

  21. The U.S. can achieve historic levels of GDP growth, or better . . . Potential GDP growth Compound annual growth rate, 2010-20, % • (not quantified) • 0.2-0.5+ • GDP growth 1990-2008 = 2.8 • 0.7-1-1 • Population increase • Change in share of working-age population • Adoption of best practice • (increase in productivity) • Next-wave innovation • (increase in productivity) • Increases in labor utilization and immigration • (increase in labor input) • Changes in regulated sectors • (increase in productivity) • Productivity enablers • (increase in productivity) • Potential GDP growth Demographic changes Levers available to companies Levers involving multiple actors SOURCE: Organisation for Economic Co-operation and Development; Central Intelligence Agency; World Bank; McKinsey Global Institute analysis

  22. 1 2 3 4 5 6 7 • Drive productivity gains in the public and regulated sectors • Reinvigorate the innovation economy • Develop the U.S. talent pool and harness the full capabilities of the U.S. population • Build 21st-century infrastructure to meet the demands of a globally competitive economy • Enhance the competitiveness of the U.S. regulatory and business environment • Embrace the energy productivity challenge • Harness regional and local capacities to boost overall U.S. growth and productivity . . . However, a broad agenda is required

  23. www.mckinsey.com/mgi

  24. APPENDIX: ADDITIONAL SUPPORTING PAGES

  25. 6.1 International comparisons suggest there is room to increase the labor inputs to U.S. growth through increased participation and migration 2009; % • Women (25–64) participation rate • Senior workers (55–64) participation rate • -11.5 • -9.0 • Youth unemployment • Migration • 2010 • +10.3 • -1.4 • 2000 SOURCE: Organisation for Economic Co-operation and Development; World Bank; CIA Fact Book; McKinsey Global Institute analysis

  26. 3 Total impact of labor force increase is equivalent to ~30 percent of historic GDP growth of 2.8 percent Increasing the U.S. labor force could add a significant amount to GDP growth but would likely require major changes in policy and practices Increases in the workforce by lever1 Compound annual growth rate, 2009-19, %2 0.2-0.3 0.7-1.1 0.1-0.2 0.1-0.2 0.3-0.5 Female participation Senior participation Youth unemployment Net migration Total impact of labor increases Assumptions3 Increase participation of females aged 25-54 in labor force from 76 to 87 percent (Sweden) Increase participation of workers aged 55-64 from 65 to 74 percent (Sweden) Reduce unemployment in 15-24 age group from 18 to 7 percent (Netherlands) Increase net migration from 4.3 per thousand to 5.7 (level of U.S. net migration in 2000) 1 Assumes all else remains constant (e.g., working hours and productivity levels). Numbers may not sum due to rounding 2 Excludes impact of dynamic demographic changes over a ten-year period 3 All assumptions are based on 2009 data comparing U.S. with international levels; the exception is net migration, which compares U.S. data for 2000 with U.S. projections for 2010 SOURCE: Organisation for Economic Co-operation and Development; Central Intelligence Agency; World Bank; McKinsey Global Institute analysis

  27. A substantial talent gap of 10% of total demand will remain, even under conservative assumptions Industries requiring analytical and technical workers are likelyto experience a talent shortage over the next decade Workers, millions 1.9 0.4 0.2 2008 employ-ment Predicted attrition Predicted increase in supply Absorption of extra capacity Additions from high-skill foreign workers 2018 talent supply Talent gap 2018 predicted talent demand NOTE: Numbers may not sum due to rounding SOURCE: U.S. Bureau of Labor Statistics; National Center for Education Statistics; National Science Foundation; McKinsey Global Institute analysis

  28. The relative quality of U.S. infrastructure has been declining 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Quality of overall infrastructure Evolution of rank for United States Distance from top ranking 2010 ranking Switzerland Hong Kong Singapore France Iceland Austria Sweden Finland Germany Denmark United Arab Emirates South Korea Canada Portugal Japan Luxembourg Netherlands Barbados Taiwan Belgium Oman Spain United States Chile Namibia Bahrain Malaysia Estonia Saudi Arabia 2001 02 03 04 05 06 07 08 09 2010 Tunisia SOURCE: World Economic Forum, Global competitiveness report 2010-2011

  29. n Broadband penetration in the United States is lower than in other countries and varies widely across states Broadband penetration Broadband subscriptions per 100 population Households Thousand Overall United States 0.61 Sweden Denmark Norway CA Netherlands Switzerland South Korea Iceland Luxembourg TX France NY Germany United Kingdom Canada PA Belgium NJ WA Finland MO Hong Kong PR CO United States RI DC MS Israel Australia 0.20 0.45 0.50 0.55 0.60 0.65 0.70 0.75 0.80 Estonia Subscribership ratio Subscribed households/total households Japan SOURCE: International Telecommunication Union; Federal Communications Commission

  30. Leader Top quartile Average Bottom quartile Economic fundamentals Household consumption Household consumption growth GDP Stock market capitalization Industrial production Trade as percentage of GDP National spending on R&D Business climate Statutory corporate tax rate Business environment FDI as percentage of GDP1 Growth of local innovation clusters Tax incentives for R&D Human capital Population and demographic profile Availability of high-quality labor Retention of foreign-born talent Cost-adjusted labor productivity Public expenditure on education Number of patent applications Transportation Infrastructure Telecommunications U.S. performance on a sample of country competitiveness indicators is declining relative to other countries U.S. relative position Key metrics Ten years ago Today Trend 1 Foreign direct investment SOURCE: McKinsey Global Institute synthesis of data from numerous sources

  31. 0-50 • 51-75 • 76-100 • 101-150 The economic benefit of a 5% increase in energy efficiencyvaries across states Household electricity bill savings $ per year SOURCE: U.S. Energy Information Administration; McKinsey Low Carbon Economics tool

  32. 0 Before After Aerospace can apply the lessons of lean manufacturing and performance management learned in other sectors such as best-in-class automotive % ESTIMATES Productivity growth has been much faster in automotive than in aerospace1 Applying several practices from best-in-class automotive could drive significant benefit for aerospace2 Productivity growth, 2000-08 Real-time performance management Labor productivity Assembly line cycle time reduction Production cycle time Production planning techniques Total cost -20% 120 100 100 +20% 100 -30% Automotive Aerospace1 1 Other transportation equipment in the North American Industry Classification System. Aircraft and spacecraft represented around 76% of value added in other transportation equipment in 2006 2 The various practices complement each other; the sizing estimates should not be considered additive SOURCE: U.S. Bureau of Economic Analysis; McKinsey Global Institute analysis

  33. 3 In some U.S. hospitals, fixed staffing of patient transport specialists means demand outstrips supply for 15 hours of the day Admissions to the ward from the emergency room by time of day Number of patients per hour per day Supply of patient transport specialists1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Hour patient left emergency room 1 Based on two specialists transporting patients up to wards 25 percent of their time; assumes 30 minutes per transport. SOURCE: McKinsey analysis

  34. Producer Distributor Distribution center Retail store • Increased visibility • Early identification and timely reaction • Supply chain • cost savings • Reduction of inventories • Fewer stock-outs and unplanned markdowns • Reduction in logistics costs and fewer delays • Effects beyond the supply chain • Enhanced shopping experience • Better theft monitoring Radio-frequency identification (RFID) could be used to managean increasingly integrated supply chain Retail sector supply chain RFID attached to pallets of goods • Optimization of the commodity flow from supplier to the store • Measurement of performance of suppliers and service providers Level of supply chain integration facilitated by RFID RFID attached to cases of goods • Accuracy check against case numbers • Integration of shelf replenishment systems with data from RFID readers RFID attached to individual items • Linkage with self-checkout counters and other in-store wireless devices • Monitor food supply • Potential implications

  35. Governments can pursue different levels of interventions 1 Drive productivity gains in the public and regulated sectors Establish and track key productivity metrics by sector Fund enabling IT infrastructure and training Set incentives that reward more productive providers/individuals Conduct “lean” program through the public sector 2 Reinvigorate the innovation economy Set clear regulatory environment (e.g., GHG1 fiscal) Establish skill-based points system to manage immigration Offer tax incentives for private R&D activities Establish public R&D institutions on strategic industries 3 Cultivate the US talent pool Set retirement incentives to reward staying in workforce Establish skill-based points system to manage immigration Provide subsidized low- cost study loans; attract ex-pats to return Publicly funded educational systems 4 Set national standards for construction Enable private infrastructure investments Provide fiscal incentives for private infrastructure build-out Expand and upgrade public infrastructure investment arm Build efficient and economically viable infrastructure 5 Reduce regulatory complexity Establish mechanism to share best practices across localities/states Offer fiscal and other investment incentives Target multinational companies to attract and pursue Enhance the competitiveness of the business environment 6 Set evolving energy efficiency standards Require energy efficiency reporting for goods and companies Provide tax benefits to companies engaged in energy-saving activity Improve efficiency of public buildings and purchasing Embrace the energy productivity challenge Increase efficiency of local/state business regulation Strengthen local schools/infrastructure Offer local fiscal investment incentives Establish public city broadband networks 7 Harness regional and local capacities EXAMPLES Low High Degree of intervention Setting ground rules/direction Building enablers Tilting the playing field Government as principal actor Agenda items for growth and renewal 1 Greenhouse gases SOURCE: McKinsey Global Institute analysis

  36. MGI experience over two decades across more than 20 countries and 30 industrysectors • Competitive intensity is the primary driver of innovation and best practice adoption in private companies – this competition leads to aggregate productivity gains as more productive companies gain share and less productive ones exit the market • Innovation that drives value-added growth and efficiency and its diffusion and scaling is the driving force of productivity growth and aggregate economic growth • Large employment sectors need to pull their weight – success in emerging or small innovative sectors is not enough to sustain overall productivity growth • Strong demand is an enabler facilitating balanced growth from both higher efficiency and the transition to higher value goods and services • Sound regulatory and business environment that encourages competition and attracts the most innovative players provides the right incentives for growth • Small improvements in large sectorscan make a significant difference for the overall productivity of the economy • Flexibility in labor and capital markets enables productivity gains by ensuring resources can be deployed quickly and efficiently where they will be most productive What have we learned about the ingredients for productivity SOURCE: McKinsey Global Institute analysis

  37. Productivity growth Compound annual growth rate, 2000-08, % New England 1.6 Productivity levels, 2008 $ Thousands per employee 1.7 Rocky Mountains 1.3 Mideast Plains 1.4 84 Far West 1.6 Great Lakes 87-88 1.8 91 97 102 Southeast 106 Southwest 1.5 113 1.2 Productivity performance differs significantly across U.S. regions Productivity levels and growth SOURCE: U.S. Bureau of Economic Analysis; U.S. Bureau of Labor Statistics; McKinsey Global Institute

  38. 7 The top 20 U.S. cities account for more than 50% of national productivity growth and approximately 40% of GDP • Contribution • % • Compound annual growth rate, 2000-08% • Population, 2008 • Millions • Metropolitan • Statistical Area • Productivity growth, 2000-08 • GDP, 2008 • Productivity • GDP • Employment • 18.8 • 2.0 • 2.6 • 0.6 • New York • 12.2 • 8.1 • 12.9 • 1.8 • 2.4 • 0.5 • Los Angeles • 6.7 • 4.9 • 5.3 • 2.2 • 3.7 • 1.5 • Washington, DC • 4.1 • 2.5 • 6.1 • 2.0 • 2.9 • 0.9 • Dallas • 3.3 • 2.3 • 9.5 • 1.2 • 1.3 • 0.1 • Chicago • 2.9 • 3.4 • 4.5 • 1.8 • 1.8 • 0.1 • Boston • 2.6 • 2.0 • 5.6 • 1.2 • 3.0 • 1.8 • Houston • 2.5 • 2.4 • 4.2 • 1.6 • 1.1 • -0.4 • San Francisco • 2.0 • 1.9 • 5.8 • 1.2 • 1.7 • 0.5 • Philadelphia • 1.9 • 2.1 • 3.0 • 2.1 • 3.4 • 1.3 • San Diego • 1.9 • 1.2 • 2.2 • 3.5 • 4.3 • 0.8 • Portland • 1.8 • 0.7 • 5.4 • 1.6 • 3.0 • 1.4 • Miami • 1.7 • 1.6 • 1.8 • 2.8 • 1.5 • -1.3 • San Jose • 1.5 • 0.8 • 3.2 • 1.6 • 2.0 • 0.4 • Minneapolis • 1.4 • 1.2 • 2.4 • 2.2 • 2.4 • 0.3 • Pittsburgh • 1.2 • 0.8 • 1.6 • 2.9 • 4.8 • 1.8 • Austin • 1.1 • 0.6 • 2.7 • 1.6 • 2.3 • 0.7 • Baltimore • 1.1 • 0.9 • 4.2 • 1.3 • 4.0 • 2.7 • Phoenix • 1.1 • 1.2 • 2.7 • 1.8 • 2.5 • 0.7 • Tampa • 1.0 • Total 53% • 0.8 • Total 41% • Atlanta • 0.9 • 1.7 • 5.3 • 0.7 • 2.0 • 1.3 SOURCE: U.S. Bureau of Economic Analysis; U.S. Bureau of Labor Statistics; Moody’s Economy.com;McKinsey Global Institute

  39. U.S. multinational companies have increased productivity more than twice as fast as other U.S. private sector firms Recession years Labor productivity (real value added per worker) $ Thousands, 2000 Compound annual growth rate, 1990–2007 % 120 U.S. multinational companies 110 3.6 100 90 All other companies 80 1.5 70 60 0 1990 95 2000 05 07 SOURCE: U.S. Bureau of Economic Analysis; U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis

  40. Opportunities exist for leaders and laggards Top quartile 25th–50th quartile Bottom quartile • Aerospace can further improve productivity by continuing to set the bar for innovation while making use of standard lean principles • Retail can continue to drive productivity growth through greater integration of online and offline channels, and innovations in responding to and engaging customers • Healthcare can increase productivity through greater use of available technology (e.g., e-mail, electronic record keeping) and broader adoption of established lean principles • Contribution to productivity growth • % 1 Productivity contribution was calculated using Moody’s Economy.com data. SOURCE: U.S. Bureau of Economic Analysis; Moody’s Economy.com; MGI Sunrise Productivity Model

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