There’s been so much earth-shaking political news in the last few weeks that I’ve neglected some of the key U.S. economic data series I’ve been following. Let’s rectify that with some abbreviated updates, starting with the productivity statistics that are the most widely followed: the labor productivity figures.
These data measure the American economy’s output in terms of just one input (worker hours), and therefore don’t tell us nearly as much as the multi-factor productivity numbers, which look at capital, material, technology, and a variety of other ingredients of what businesses turn out. But the labor figures come out on a much timelier basis, and are widely regarded as a gauge of the nation’s ability to improve living standards on a sustainable basis.
So it was definitely goods news that these numbers went up in the third quarter (at least preliminarily) on a sequential basis for the first time in four months. The preceding three-quarter stretch of sequential declines was the first such period since 1979 – which few Americans who lived through it remember fondly. But in the third quarter of this year, that string was broken, and labor productivity rose by 3.03 percent on an annualized basis. That was the best such performance since the 4.09 percent annualized sequential advance in the third quarter of 2014. And a little bonus: The second quarter’s most recent 0.60 percent decline reading at an annual rate was revised up to a 0.15 percent dip.
Sadly, though, this uptick still leaves the current economic recovery as a major labor productivity laggard. Here’s how it compares with its two predecessors:
1990s recovery: +23.01 percent
2000s recovery: +16.07 percent
current recovery: +7.50 percent
And let’s not forget – the current recovery is already longer than the 2000s expansion.
Manufacturing’s third quarter labor productivity growth (just under one percent annualized over the second quarter) wasn’t nearly as good as the overall U.S. number (which measures the performance of non-farm businesses). But manufacturing’s over the last year hasn’t been nearly as bad – though its second quarter sequential labor productivity loss was revised down to a 0.50% decline.
At the same time, manufacturing’s productivity gains during this expansion have been pretty feeble compared to its recent predecessors as well, as the numbers make depressingly clear:
1990s recovery: +46.78 percent
2000s recovery: +41.08 percent
current recovery: +22.93 percent
If you’re thinking to yourself something along the lines that “I didn’t hear much about productivity during this last presidential campaign,” you’re absolutely right. Both major party candidates did, however, speak continually about the need to revive domestic manufacturing. The chattering classes on both sides of the aisle seem convinced that this goal is (take your pick) incredibly cynical or incredibly naive. That’s a sure sign that they’ve been thinking even less seriously about productivity – and about the leadership role even a stagnant manufacturing sector has unmistakably been playing.
Tomorrow: the latest real wage figures.
And of course I hope everyone had a great Thanksgiving!