By Matt Grossman

New analysis suggests that cutting-edge tech giants and other standout companies have pushed the economy forward more than previously understood.

In a new paper, researchers at McKinsey found that a relatively small handful of top businesses have done far more to accelerate workplace productivity than the vast sea of their competitors.

Productivity measures how much workers accomplish, on average, during a standard shift: an important variable in determining whether the economy can thrive and grow without generating inflation.

Many economists have figured that America's solid productivity improvements in the past decade grew out of a massive agglomeration of tiny tweaks at millions of businesses. In fact, what happens inside some of the U.S.'s megacaps likely weighs quite a bit heavier, according to McKinsey.

Researchers at the consulting firm's internal research arm studied how much each of a set of more than 8,000 firms in the U.S., the U.K. and Germany added to the overall group's productivity between 2011 and 2019. They found in a report published Wednesday that in the U.S., just 5% of companies contributed 78% of the productivity growth that the entire U.S. group achieved over those eight years.

As might be expected, tech giants including Amazon.com, Nvidia and Broadcom were prominent among the outperformers. In other industries, superstar retailers such as Home Depot have moved the ball forward, as have, perhaps more surprisingly, big air carriers such as United Airlines, McKinsey thinks.

By the research team's thinking, each of these productivity superstars harnessed breakaway capabilities to transform the way its workers get things done. Home Depot's logistics, pricing and IT infrastructure, for example, have allowed its retail workers to produce far more value on the job than cashiers at mom-and-pop hardware stores ever could.

That's not to say broader factors don't also play a part. The American culture of enterprise and the U.S.'s relatively permissive rules for businesses foster an environment that makes those innovations possible, said Olivia White, director of the McKinsey Global Institute, which produced the report.

"It's very much going to be the fruit of both the regulatory environment in the country and also the ecosystem among the companies," White said. "The way the whole system works really, really matters."

Data published Thursday by the Labor Department showed that productivity fell by 0.8% in the first three months of 2025, after rising by 1.7% in 2024's fourth quarter. It was the first quarterly decline in productivity in almost three years.

Because explaining productivity is so subtle, many economists don't pay that much attention to changes from quarter to quarter. Over 2023 and 2024, U.S. productivity growth averaged about 2.6% per year, well above other big economies' track record.

During those years, American productivity outperformance fueled a remarkable stretch of resilient growth coupled with falling inflation, a pairing that lifted the U.S. as a magnet for global investment. Yet there's been no deep consensus among economists on what set the U.S. apart.

Competing explanations have included an intensive shortage of workers that hit during the postpandemic boom, which forced companies to deploy limited staff more productively. Others have argued that a large cohort of newly created businesses gave rise to thousands of new sandboxes where bosses could rethink how work gets done.

McKinsey's research casts some doubt on those ideas. During the 2010s at least, McKinsey's new work suggests, U.S. productivity growth had a lot more to do with seismic changes that originated from a small posse of standouts.

The firm also cites bold moves such as how Broadcom shifted its strategy to focus on infrastructure software, rather than just semiconductors, as turning points in the U.S. productivity story. Similarly, workers who played a part in Apple's smartphone business were helping to develop a genuinely life-changing and remarkably profitable product.

Write to Matt Grossman at matt.grossman@wsj.com

(END) Dow Jones Newswires

May 08, 2025 10:26 ET (14:26 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.