Thursday, June 05, 2003

It's always fun to take apart statistics and see how they really work inside. Case in point: yesterday's productivity figures released by the US Department of Labor. The DOL reported that nonfarm business productivity increased 1.9% in 2003:I. The productivity statistic is simply business output -- a modified version of GDP -- divided by labor hours. Rising productivity thus means either output rising and hours falling, output rising but faster than hours rising, or output falling but slower than hours falling.

In 2003:I, we had scenario #1. Output rose 1.8% while hours actually fell 0.1%. Year-over-year (i.e. from 2002:I to 2003:I), hours remained stagnant -- 0.0% growth -- although this was the first non-negative change year-over-year in hours since 2000. At the same time, we read today that first time claims for state unemployment insurance rose to 442,000 in the week of May 31, and the four-week moving average to 430,500. As Reuters observes, "The four-week average has been stuck above the key 400,000 mark -- a sign the labor market is struggling -- for 14 weeks." The official unemployment rate is expected to tick up to 6.1% for May, and considering official figures radically undercount the unemployed -- both by excluding folks who have given up looking for work and by cooking the books a bit -- we can be assured the ability of people out in the US economy able to soak up these consistent productivity gains is consistently weakening.

Stagnant real wages + falling hours worked + rising output. How long can debt keep this formula afloat?


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