November 6, 2003
BUSHONOMICS:
New Jobless Claims Drop Sharply (Fox News, November 06, 2003
The number of Americans filing first-time claims for jobless benefits took an unexpectedly sharp plunge last week, reaching a level not seen since before the economy tumbled into recession in 2001, a government report showed on Thursday.Initial claims for state unemployment aid fell 43,000 to 348,000 in the week ending Nov. 1 from a revised 391,000 in the prior week, the Labor Department said. It was the lowest claims level since late January 2001, two months before the recession began.
Wall Street economists had expected claims to slip to 380,000 from a strike-elevated 386,000 initially reported for the week ending Oct. 25.
Productivity Soars in Third Quarter (Fox News, November 06, 2003)
The productivity of U.S. businesses soared in the third quarter, as firms managed to raise output at a pace not seen in over 10 years with only a small increase in the number of hours workers put in on the job, the government said on Thursday.Non-farm business productivity climbed at an 8.1 percent annual rate in the third quarter, accelerating from an upwardly revised 7.0 percent gain in the prior three months, the Labor Department said. [...]
Some economists have begun to speculate that the trend rate of U.S. productivity, which accelerated to around a 3.5 percent annual rate in the mid-1990s, may have picked up further.
Over the last four quarters, productivity has risen 4.7 percent.
Economists say that over time, strong productivity growth will raise standards of living. But they say in the short-run it could prove a hurdle to job creation, a key element for a sustainable expansion.
Someone ought to take away Terry McAuliffe's belt and shoelaces. Posted by Orrin Judd at November 6, 2003 10:33 AM
Time to disaggregate the aggregates. I suppose that, to some extent, is what Wall St. is doing, those sly dogs.
The Dow has been advancing at just about the rate I expected back in January -- on track to be around 10,000 by the end of the year. (How did I predict this number; just the rough result you get of assuming modest, steady recover at the pace of past recoveries.)
Anyhow, I don't believe that productivity gained anything like 8% in one quarter, and it looks like the smart money doesn't believe it either.
Posted by: Harry Eagar at November 6, 2003 12:07 PMEven Harry could have not predicted (and thus, does not believe) that productivity could have been this high both as the economy was retrenching and now as it is recovering. The truth is that this has startled many economists. On the other hand, when the retrenchment was caused by an investment bubble (as opposed to a fed-driven slowdown to cool down an over-heated economy) and when businesses have the discipline to watch GDP grow for several quarters in a row (and strongly, the last two) without adding nary a worker (until seemingly, now): How can one doubt that the economy is poised to produce at high levels of efficiency and that it is doing it so?
Posted by: MG at November 6, 2003 1:00 PMFrom my little corner of the industrial market, it looks like industry overinvested in the late '90s by a factor of two or three. This was caused in part by the bubble -- lots of cheap equity money begging to be spent -- and in part by Y2K mania. The productivity gains are the sudden realization of massive overinvestment made several years ago as those machines finally start getting used on three shifts and overtime. If this scenario is right, what is remarkable is that unemployment, which was artificially and unsustainably low in the late bubble, didn't soar to at least 8-10 percent. This is in line, however, with modern management theory that says that the corporation should maintain skilled and senior employees in order to respond quickly and relatively cheaply once demand picks up.
Posted by: David Cohen at November 6, 2003 2:11 PMHarry/MG:
Economists predicted that productivity number almost exactly because of the growth number that preceded it.
oj -- Not all econs predicted this kind of growth a few quarters ago (certainly NO Dem leaning ones, and there are many besides Krugman). Once the figures hit them in the face, the productivity figure was a simple derivative statistic.
Posted by: MG at November 6, 2003 3:43 PMYou'll recall I didn't believe the growth number, either.
In an economy moving at breakneck speed away from production toward service, it's impossible to believe 8% productivity gains. It would have required gains close to 20% in the non-service sectors.
The fastest growing job title is probably mortgage loan processor, a job that has experienced zero productivity increase over the years.
Posted by: Harry Eagar at November 6, 2003 5:26 PMIt's not necessary to take away Mr. McAuliffe's belt and shoelaces.
He has his hands over his ears and keeps singing, "LaLaLaLa;I can't hear you". It works just as well.
Posted by: John J. Coupal at November 7, 2003 10:08 AM