Blood from Stones

11 August 2003


Rising Productivity Keeps Lid on Job Growth

Worker productivity is up in the US, and the unemployment rate is down. So why isn't any one cheering? Maybe it's because there are 500,000 new "discouraged" workers who are no longer counted in official statistics. The old saw is true "Figures can lie, and liars can figure."

Productivity went up in the second quarter of 2003 of 5.7% was more than double the first quarter's 2.1%. In order to balance the equations, higher productivity has to translate into either greater revenue and ultimately profits for companies or higher wages for their workers, or a combination of the two. The discouraged worker fact is significant because it closes off the possibility that new hiring took care of the productivity increase.

Wages, though, have not risen significantly in two years. There aren't more workers getting pay checks, and those with the pay checks haven't seen them grow at all. Consumer confidence is eroding as a result, and consumer credit is wobbly.

American business is showing some earnings growth, but that has to translate into something that puts money into other folks' hands eventually -- either new spending or dividends. New spending will increase demand for work, and dividend will do the same in consumer spending. The problem is that both of these can be addressed without more Americans getting jobs.

Verizon is facing a strike and the Communication Workers of America are upset, in part, by telephone jobs leaving the US for India. With 80% of the modern economy based on services, shipping jobs overseas is cheap, easy, and permanent. It would be far healthier for productivity to drop off and job creation take off.

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