Wednesday, November 07, 2007

More good economic news (no wonder the mkt is tanking!)

Specifically, labor productivity grew by 4.9% in the 3rd quarter.

The Labor Department reported that productivity -- the amount of output per hour of work -- jumped at an annual rate of 4.9 percent in the July-September quarter. That was double the 2.2 percent rise in the second quarter and represented the fastest surge in worker efficiency since 2003.At the same time, wage pressures eased with unit labor costs dropping at an annual rate of 0.2 percent, the best showing in more than a year.

Both outcomes were far better than had been expected and should relieve some of the concerns that a remarkable surge in productivity that began in the mid-1990s was in danger of being reversed.

The slight drop in wage pressures was especially welcome after hefty increases over the past four quarters. Rising wages are good for workers but if they are not accompanied by strong productivity gains, they raise concerns among Fed policymakers about inflation.

The 0.2 percent decline in unit labor costs in the third quarter followed a 2.2 percent increase in labor costs in the second quarter and even bigger jumps of 5.2 percent in the first quarter and 10.3 percent in the fourth quarter of last year.


The article even gives its own punchline!!

Wall Street was not impressed with the big rise in productivity and slowdown in wage pressures, preferring to worry about the weakness of the dollar against other currencies. The Dow Jones industrial average was down more than 240 points in afternoon trading.

4 comments:

Dirty Davey said...

"...productivity...jumped at an annual rate of 4.9 percent... [which]... represented the fastest surge in worker efficiency since 2003...."

"The slight drop in wage pressures was especially welcome... Rising wages are good for workers but if they are not accompanied by strong productivity gains, they raise concerns...."

Wait just a gol-darned second! If I try to follow the syllogism,

(1) Rising wages are good only when accompanied by productivity gains.

(2) We had really good productivity gains.

therefore

(3) It is a good thing that wages dropped a bit?!?!

No wonder people aren't disposed to believe that the economy is doing really well, if this is the sort of logic that defines "doing well".

Anonymous said...

the good thing, of course, is that productivity gains were NOT accompanied with even stronger wage growth. The concern had been the wage growth could lead to inflation (aka cost push inflation)...In this case, the stalling of wage growth can be seen as a positive, given robust growth (unaccompanied by stronger productivity gains) in previous months.

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