The less productive U.S. economy
WASHINGTON (MarketWatch) — After a brief pick-up due to “overfiring,” the trend in productivity is heading in one direction: down.
http://www.marketwatch.com/story/the-less-pro...beforebell
And from a job’s perspective, thank goodness for that.
| date | report | Consensus | previous |
|---|---|---|---|
| Aug. 8 | Productivity | 1.2% | -0.9% |
| Aug. 8 | Unit labor costs | 0.5% | 1.3% |
| Aug. 9 | Weekly jobless claims | 368,000 | 365,000 |
| Aug. 9 | Trade deficit | -$47.5 bln | -$46.7 bln |
| Aug. 10 | Import price index | -0.1% | -2.7% |
“The only reason 1.7% GDP growth can go with 1% jobs growth, is because productivity growth is less than 1%,” said Northwestern University economics professor Robert Gordon, who is one of the world’s foremost experts in the field.
By Gordon’s reckoning, a sharp upward spike in productivity in 2009 and the early parts of 2010 was simply due to companies overfiring in response to the financial crisis of 2008 and 2009. Now, productivity is on the way back down as companies have stopped these mass layoffs — as evidenced by the sharp drop in first-time claims for unemployment benefits over the last year.
“We had these great inventions in the 19th century that took 100 years to work through,” Gordon said, pointing to the highway system and air conditioning as two major ones. The Internet age gave a brief lift to productivity as well. But many newer inventions aren’t doing much at all.
His numbers on trend productivity show a revival to an annualized rate of 2.3% in mid 2001 before a decline down to 1.7% in 2007. He now sees the trend at a postwar low of 1.2%; actual productivity on an eight-quarter moving average is actually below the trend as companies have corrected the overfirings.
“If you’re just getting off a subway and pulling out an iPhone instead of a Motorola Razr, you’re not really doing anything different,” Gordon said. The boon in natural-gas production is really an offset to higher prices of oil and the polluting effect of coal, he added.
The Labor Department on Wednesday is due to release second-quarter data on productivity, an oft-maddening, frequently revised and rarely market-moving number that nonetheless provides vital insight on the performance of the economy.
Though the jobs picture brightened a bit in July, with 163,000 nonfarm positions created, Gordon says the unemployment rate isn’t likely to drop back down to prerecession levels around 5% anytime soon.
“I think more realistically that, gradually, [unemployment] equilibrium will move from 5% to 7%,” he said. He says that fits with anecdotes of businesses finding difficulty in hiring workers with the right skills, and with skills eroding from the long-term unemployed. In July, there were more than 5 million people who have been out of work for more than six months, according to Labor Department data released Friday.
But wage growth will continue to be limited, pointing to a recent Caterpillar strike in Illinois over wages and health-care costs that he says is “short-hand” for the whole phenomenon.
After last week’s avalanche of important data on jobs, manufacturing and services, the coming week brings statistics that aren’t likely to trigger sweeping market movements.
On Monday, the Federal Reserve is due to release the latest senior loan officer survey, an important quarterly report asking top commercial bank officials about the demand for loans they have seen as well as how willing the banks are to make those loans.
Consumer credit has been on the upswing since the spring of 2011, and the June data due Tuesday from the Fed should confirm that move. However, those gains have been mostly due to demand for car and student loans.
June trade data, due Thursday, will provide economists with an opportunity to see whether the worrying signs on new orders that has shown up in purchasing manager surveys is actually translating into less activity with America’s trading partners.
So far, export growth has been slowing but not at a dramatic clip.
The weekly jobless claims report will be eyed for any significant shifts, after July’s data contained big swings largely owing to the timing of car plant retoolings.
