Cautious Outlook from Productivity and Costs

This is pretty amazing, really:

Nonfarm business sector labor productivity increased at a 9.5 percent annual rate during the third quarter of 2009, the U.S. Bureau of Labor Statistics reported today.

That's a stunning number. But you better pay attention to what this means:

Output increased 4.0 percent and hours worked decreased 5.0 percent in the third quarter of 2009.

Got it? Here's the bottom line:

From the third quarter of 2008 to the third quarter of 2009, nonfarm business output fell 3.5 percent and hours worked fell faster, 7.5 percent, resulting in a productivity increase of 4.3 percent (tables A and 2). The four-quarter decline in hours was the largest in the series, which begins in 1948.

Here was the mantra from employers:

Work harder, get paid for fewer hours, OR GET FIRED!

This sounds great if you're an employer, but as an employee, or wanna-be employee (that is, you're unemployed)?

Then it's horrible, as the better the productivity of existing workers, the less likely it is that you, dear reader, will be able to find a job, as the wall of output has yet to meet the wall of exerted labor.

This also means that per-unit of output, labor is reaping less in wage, which in turn means that per unit of output there is less in disposable income available to purchase it.

Yeah, the futures liked that report, "amped" by the CNBC liars parade - it's "great" that companies are squeezing the employee and getting better profits out of smaller labor inputs, right?

Exactly who is it that buys the output of those firms, and with what do they purchase it? On a forward basis what will this mean for consumption - and eventually, both production and sales?

Comments

[Karl Denninger:]

Gee, looks like I was vindicated (employment report this morning), eh?

Might want to rethink your thesis.....

Nov 06 09:16 AM

[User 494952:]

Please explain your statements and what you believe. Otherwise you might be thought of just another brainless parrot that thinks they are witty and wise. Tired of the BS

On Nov 05 08:54 PM FB5000 wrote:

> Klown, what's wrong with you?
>
> Productivity is a good thing. It is always a good thing. 9.5% is
> unsustainable and it means that increased employment is in the pipeline.
>
>
> The mother of all recoveries is underway.
>
> Someone on Main street (I love that folksy appeal) must be happy
> - they went shopping by the looks of the retail numbers.
>
> Utter nonsense.
>
> You serve a useful purpose though. You are the prverbial canary in
> the coal mine. When you stop singing it will signal we are close
> to the top. For that alone - it is worth tuning in to read your drivel.
>
>
> Thanks

Nov 06 10:01 AM

[Kimball Corson:]

This increased productivity derives from capital investment and so the return for it goes to capital. No surprise there. Increased productivity of this kind is precisely what shrank employment in our manufacturing sector, that and the export of labor intensive jobs abroad. Again no surprise. This is the real source of our unemployment that will not go away and it is a key part of our trade imbalance too. We don't manufacture and export as much as we otherwise could if the government restructured the incentives in this sector. But the governement ignores this structural problem like it does all others, except perhaps banking where it is been equally ineffective, aside from salvaging the credit crunch. The governments focus is myoptic and misguided. It throws tons of money out for a minor and transient bump-up in GDP, doing little more than driving up asset prices worldwide. Until we fix our structural problems, expect to live in a land of "lower normal" and bubbled asset prices.

Nov 06 05:39 PM