Nov 5th, 2009 at 12:22 pm
Productivity Surging
Nonfarm business sector labor productivity increased at a 9.5 percent annual rate during the third quarter of 2009, the U.S. Bureau of Labor Statistics reported today.
Rapid productivity growth is, ceteris paribus, a good thing. It implies that the economy could be expanding very rapidly, raising living standards for all. What’s happening, however, is that productivity is growing considerably faster than GDP. That’s great for profits, but implies an extended period of very bad labor market conditions—terrible for the unemployed, and generally lousy for wage-earners.
10 Responses to “Productivity Surging”
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November 5th, 2009 at 12:37 pm
I think this mixes up cause and effect. Short term jumps in productivity are the effect of bad labor market conditions: you’ve laid off a lot of workers and your relatively static capital stock is sitting around with fewer individuals to operate it. So each of them is more productive.
November 5th, 2009 at 12:38 pm
To a certain extent, this will be an ongoing problem, as there are emerging ways of getting things done, that just don’t require actual people, or allow less to do more, and in the past, we internalized a certain high level of inefficiency when it came to employment.
If efficiency reigns, expect change, but efficiency is not the end-all, be-all, people need to work, to eat, to thrive, and if they don’t, the cards start falling, and the brutality of the selfish will be met by the desperate, and, by the looks of the conservative movement, the stupid as well.
November 5th, 2009 at 12:44 pm
The era of falling living standards for average workers has begun. Even when (if?) the unemployed find new jobs, they won’t recoup their former wages & benefits. And with so many searching for work, wages for the employed aren’t going anywhere either.
But look at the bright side – maybe this will be the last straw that pisses people off enough to push back against our whoring GOPocrat political culture with its faux “2 party” bullshit.
November 5th, 2009 at 12:58 pm
World ends, union workers most hurt.
November 5th, 2009 at 1:04 pm
So I guess that means Matt’s in favor of Casey Mulligan’s prescriptions on increasing job growth? http://www.forbes.com/2009/07/26/right-conservatives-bush-obama-opinions-columnists-unemployment-jobs.html
November 5th, 2009 at 1:12 pm
Productivity spikes are normal for the early stage of a recovery. It was up 9.2% in the second quarter of 1983 and 6.7% in the first quarter of 1992.
The 1983 spike was followed by several quarters of strong job growth. I would not expect a repeat of that because Fed policy is already as aggressive as it can get, credit markets are still a mess, and consumers are still overburdened with debt instead of waiting for an excuse to spend like they were in 1983. That said, a productivity spike does not imply an extended weak labor market in and of itself.
November 5th, 2009 at 1:27 pm
This seems to get the ordering wrong. Productivity spikes always happen before hiring surges. This could well just be the bump before a lot of hiring!
November 5th, 2009 at 1:40 pm
Productivity increases are normal when everyone that is to old or to young or to sick to work at maximum possible capacity is already fired and the rest works like mad without thinking of the negative long term effects on their productivity (not to mention general well being besides those stupid overvalued gdp numbers) due to a horrible job market. That kind of productivity increase is certainly not a desirable one.
November 5th, 2009 at 1:50 pm
Marshall gets this right. Productivity automatically goes up when employment goes down, since the marginal value of labor goes up when fewer people are working. It doesn’t mean people are working harder–it’s just an accident of economic theory. Krugman is always saying the French workers are more productive than American workers, but that was a direct consequence of higher unemployment in France (which I’m sure Krugman knows).
November 5th, 2009 at 2:18 pm
As everyone is saying, a productivity spike necessarily happens if there is a period in a downcycle where production starts recovering sooner than employment, and that period almost always happens to one degree or another. So it really doesn’t tell us anything interesting yet.
That said–our return to economic health is going to depend in part on a greater share of income going to labor, particularly workers on the lower end of the distribution, than has been the recent norm. So it is not too soon to think about how to make sure productivity gains translate into higher wages distributed in such a way.