Industrial production is both highly variable and correlated across sectors. This correlation arises in part from common or aggregate shocks and from sector-specific shocks that propagate across sectors via input-output linkages or other complementarities in production. Using factor analytic...

We find disparate trend variation in TFP and labor growth across major U.S. production sectors over the post-WWII period. When aggregated, these sector-specific trends imply secular declines in the growth rate of aggregate labor and TFP. We embed this sectoral trend variation into a dynamic...