Remember the productivity mini-freakout of 2022 and early 2023? Real output per hour in the nonfarm business sector, the most watched measure of labor productivity, had posted five consecutive quarters of year-over-year declines, the first time that had ever happened (“ever” in this case going back to the late 1940s, when the US Bureau of Labor Statistics data series begins). “Americans are becoming less productive, and that’s a risk to the economy,” was one headline. “American worker productivity is declining at the fastest rate in 75 years — and it could see CEOs go to war against WFH,” was another.

That freakout is over. Three consecutive quarters of strong growth have put productivity either back on trend or well above it, depending on which recent trend line you’re following. Productivity’s sharp rise and fall from 2020 to 2022 was apparently just another one of those weird pandemic phenomena, now disappearing in the rearview mirror.

The short- to medium-term significance of the recent productivity recovery is that rising productivity reduces inflationary pressures, thus making a soft-landing scenario likelier in which inflation is tamed without a recession.

The long-term significance of productivity growth is that it allows living standards to rise. Since the early 1970s, productivity growth has been anemic in the US other than a decadelong spurt starting in the mid-1990s. Even with the revival over the past year, growth still appears low by pre-1970 standards (the chart below shows five-year annualized growth because the one-year rate is noisy and the three-year one is riding the pandemic roller coaster shown in the first chart).

What comes next for productivity growth is one of the most important questions facing the US economy (and the world’s, but for simplicity’s sake I’ll stick to the US here). A further acceleration could solve lots of problems, making it much easier to service the debts the federal government has run up over the past couple of decades, adapt to the aging of the population and finance the transition away from fossil fuels, among other things. It could cause some problems, too, given that the most obvious potential driver of productivity gains in the near future is artificial intelligence taking over tasks from coders, lawyers, accountants, artists, journalists, economists and the like.

Labor productivity as measured on an economywide scale is simply gross domestic product (or the share of it generated by, say, nonfarm business) divided by hours worked. Economists also estimate what’s called total-factor or multifactor productivity, which includes other inputs such as buildings, equipment, energy and software. The growth that remains is generally interpreted as the result of technological progress.

Before the Industrial Revolution that began in the UK in the late 1700s, there was very little such progress, and productivity barely budged from century to century. Then came the takeoff. Here’s real GDP per person in Great Britain since the year 1,000, courtesy of the Maddison Project at the University of Groningen in the Netherlands.

The steam engine drove the initial productivity uptick, but the sustained boom that lasted from about 1870 to 1970 in the US was due mainly to four clusters of innovations, Northwestern University economist Robert J. Gordon concluded in his 2016 epic The Rise and Fall of American Growth: (1) electrification, (2) the internal combustion engine, (3) telecommunications and mass media, and (4) sanitation and medical improvements. “The economic revolution of 1870 to 1970 was unique in human history,” Gordon wrote, “unrepeatable because so many of its achievements could happen only once.”

Since then, there have been some big technological advances related to computing and the internet, to which the 1990s/2000s productivity acceleration was widely attributed. But these haven’t transformed daily life to anywhere near the extent that Gordon’s four big inventions did, and some of the ways that they’ve changed it have arguably made life worse.

Then again, in the early days of the Industrial Revolution in the UK, life definitely got worse for most workers. New York University Abu Dhabi economic historian Robert C. Allen dubbed this period of backsliding “Engels’ pause,” for Friedrich Engels, who documented it in his 1845 book The Condition of the Working Class in England before going on to co-write The Communist Manifesto with Karl Marx three years later.

Engels’ pause is highlighted in a 2021 paper by economists Erik Brynjolfsson of Stanford University, Daniel Rock of the University of Pennsylvania and Chad Syverson of the University of Chicago (paywall- and equation-free summary here) that proposes a “Productivity J-Curve” in which productivity-enhancing technological innovations first bring an apparent drop in productivity growth because “realizing their potential also requires large intangible investments and a fundamental rethinking of the organization of production itself.” Brynjolfsson and his co-authors argue that the introduction of AI into business is showing signs of following just such a curve.

That sounds plausible enough. The question is how big the eventual impact will be. Has the productivity pause of the past two decades been preparing the way for another 10-year spurt or a much bigger transformation? Gordon is, not surprisingly, dismissive, telling the New York Times that he doubts the gains will even measure up to those of the 1990s/2000s. Meanwhile, Sundar Pichai, chief executive officer of AI purveyor and Google parent Alphabet Inc., has been saying for years that the impact will be “more profound than fire and electricity.”

In between those two extremes is a lot of room for increased prosperity but also other outcomes such as disappearing jobs and spiraling economic inequality. “There is nothing automatic about new technologies bringing widespread prosperity,” Massachusetts Institute of Technology economists Daron Acemoglu and Simon Johnson wrote in their 2023 book Power and Progress: Our Thousand-Year Struggle Over Technology and Prosperity. “Whether they do or not is an economic, social, and political choice.” Still, facing that choice seems preferable to not even getting the opportunity.

Justin Fox is a Bloomberg Opinion columnist covering business, economics and other topics involving charts. A former editorial director of the Harvard Business Review, he is author of “The Myth of the Rational Market.”