December 03, 2003
THE WORST ECONOMY SINCE THE GREAT DEPRESSION?:
Productivity jumps to 9.4% rate in Q3, best since 1983 (Reuters, 12/03/03)
The productivity report, which showed output climbing at a 10.3% rate but hours worked up just 0.8%, offered confirmation the sizzling pace of growth, the strongest quarterly expansion in gross domestic product in nearly 20 years, primarily reflected the ability of businesses to squeeze more out of their existing workforce. [...]Most economists believe the third quarter's stellar productivity performance is unlikely to be sustained, although some believe the productivity trend, which accelerated to around a 3.5% annual rate in the mid-1990s, may have picked up further.
Over the last four quarters, productivity has risen 5%.
In the longer term, strong productivity growth will help boost standards of living, although in the short run it may prove a hurdle to stronger hiring.
Four quarters of 5% productivity growth--from my limited understanding of math and economics--means $500 billion was added to our GDP just by folks working harder, smarter, and more efficiently. This during a time when businesses were not investing in new equipment, which should enhance such growth even further. Posted by Orrin Judd at December 3, 2003 10:34 AM
And when the trailing indicator "JOBS" follows as it inevitably does? The response from liberals is already in the talking points: "Well....those numbers don't tell the whole story. Those so-called new jobs are all $7/hr jobs . . . " And thus, the glass will remain half empty as long as they're out of power.
Posted by: John Resnick at December 3, 2003 10:45 AMJobs have already begun to grow (Sep, Oct and expected Nov ~400K) and the unemployment rate may already be sub-6% (a damm good number before the bubble).
At some point most of the electorate will figure out that GDP (which is a measure of $ value) could have not been growing so much on the back of $7/hr labor inputs only without resulting in other benefitial residuals: (a) stronger profits to drive stock prices higher, 401K, and future capital improvements; (b) tax receipts to feed the belly of the state and federal monsters; (c) a starting point for the unemployed at $7/hr but but with huge upside pressure as the positive impact of (a) and (b) really get going.
Posted by: MG at December 3, 2003 11:27 AMMG: if only the electorate were properly informed..... as are you.
Once again, Democrats have staked out territory that requires bad things to happen (or continue to happen) in order for their platform to be substantiated.
Posted by: John Resnick at December 3, 2003 03:17 PM> $500 billion
That looked unreasonably high to me, so I got out my scientific calculator and did some searching on AltaVista. And you know what, it *is* $500 billion. That's like, more than the whole defense budget. Added. In one year. A *bad* year.
In the word of Keanu Reeves, "Whoa."
Aside from job growth lagging the economic growth numbers, as they normally do, the deficit numbers reported by states around the country should start looking a lot better around election time next year, as the economy serves to boost tax revenues in the first two quarters of 2004. Where this could really hit home is in California, where the Democrats right now are saying even with all his planned budget cuts, Schwarzenegger will still have to raise taxes to wipe out Gray Davis' deficit. If Arnold gets his cuts passed in Sacramento, the improving U.S. economy may take care of the rest of the deficit for him.
Posted by: John at December 4, 2003 01:28 AMProductivity growth is not the same as economic growth, although it is needed for long term economic growth.
The economy could shrink or stagnate, but productivity still grow, which happened briefly sometime in the early Bush years.
In deflationary times, which we may be in now, total output could theoretically increase (in terms of the number of widgets produced) but because the price of each one is lowered, the GDP would decrease despite higher production because the value of those products are less.
Don't get me wrong. 5% productivity growth is good. But it is not economic growth and it does not necessarily translate into any increase in the GDP.
5% productivity growth does not mean $500 billion was added. Only if the economy grew 5% annually would we get $500 billion, and 5% economic growth would NOT be a "bad" year, but a "very good" year.
Last quarter's growth rate of 8.3% is very good, but we'll have to see if it sustains and how much the economy grew per annum.
Posted by: Chris Durnell at December 4, 2003 11:02 AM