Chart of the Day: Record Productivity Growth
HT: PeakTrader
CARPE DIEM
Professor Mark J. Perry's Blog for Economics and Finance
Saturday, April 09, 2011
HT: PeakTrader
About Me
- Name: Mark J. Perry
- Location: Washington, D.C., United States
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
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35 Comments:
The U.S. has the highest and largest skilled workforce in the world.
Hey, Vange Gloomy-Pants:
How is it that US productivity keeps rising, if government is so impossibly awful as you keep saying?
I say our government is a solid mediocre, C-.
I'd like to see that first bar broken down into shorter segments more comparable to the time periods of the other bars. What's interesting is that productivity takes a plunge precisely during the big government, "Great Society" years of the late 60s and the 70s, then heads back up again as we moved back towards Reagan and the "New Democrats." This fits perfectly with all the data about how socialism in Europe and elsewhere kills productivity and growth, which is why the "poor" here are so much richer than the rest of the world.
How can we measure the productivity of the public sector...? It seems that all of the productivity increase is being absorbed by the public sector in the form of spending...
Or as Mike Mandel would say, the great outsourcing productivity bonanza.
What will be the effect if the Fed continues with its loose money policy?
"How is it that US productivity keeps rising, if government is so impossibly awful as you keep saying>"...
ROFLMAO!
What a loon!
There's rising productivity 'in spite of the federal government's best efforts' to put a damper on it...
Imagine a country in which the right to a welfare check is vigorously protected—but where the government can destroy legitimate businesses and professions with impunity...
How does the BLS compute Producitivy? Read all about it here.
bubble-baby-benji-
"How is it that US productivity keeps rising, if government is so impossibly awful as you keep saying?"
easy.
understate inflation and it looks like productivity.
swap out CPI even for something like the BPP and most of this productivity miracle disappears.
use pre 1992 CPI, and it's gone altogether.
This comment has been removed by the author.
Here are some relevant data on China:
China’s employment and compensation costs in manufacturing through 2008
BLS
As of year end 2008, China’s employed population was reported to be 775 million, constituting 58 percent of the country’s total population.
China’s manufacturing employment continued to grow from a total of 97.91 million at the end of 2007 to 99.01 million at year end 2008.
...manufacturing workers in China are earning more than ever before, average hourly compensation costs were only $1.36 in 2008. China’s hourly compensation costs remain far below those of many of its East Asian neighbors like Japan ($27.80) and Taiwan ($8.68), but are roughly on par with those of others like the Philippines ($1.68).
...average weekly hours worked in China’s urban manufacturing sector at the beginning of November each year show a decrease from 50.4 hours per week in 2006 to 47.9 hours per week in 2008.
Inflation in China has been substantial. Consumer prices in urban areas increased an average of 3.3 percent annually from 2005 through 2008. Consumer prices in rural areas increased even more rapidly, at an average annual rate of 3.9 percent.
Estimated hourly compensation costs of manufacturing employees in China, 2002–08
2002 4.74 yuans ($0.57)
2004 5.50 yuans ($0.66)
2006 6.44 yuans ($0.81)
2008 9.48 yuans ($1.36)
Monthly compensation per employee (98.46 million in manufacturing)
2008 1799 yuans ($259)
Yearly compensation per employee (98.46 million in manufacturing)
2008 21,593 yuans ($3,108)
Despite large increases in recent years, hourly compensation costs in China’s manufacturing sector remained only 4 percent of those in the United States in 2008; that year, hourly compensation costs rose to $1.36.
Peak Trader stated:
"Here are some relevant data on China:"
Here are productivty and wage data for China: Financial Times Chart (4-11)
The chart shows soaring productivity and wages in urban areas.
Buddy, your link doesn't work.
Finacial Times China Wage/Productivty Chart is here. Sorry for the previous dead-end.
Must be the Facebook factor. Hopefully we can keep it up for the next 23 years at least.
The BLS tried the productivity scam in the late 1990s when it claimed that faster processor speeds had caused the computer industry to increase real output by several hundred percent even though the extra billions of dollars were never paid by anyone or received by anyone. It is a political body that has little trouble distorting the data to produce conclusions favoured by it master. As such it is not to be trusted by any rational individual.
Buddy, China's productivity and wages are soaring, when its high inflation rate is excluded.
Also, your chart is based on PPP, which doesn't take into account quality and consumption (pattern) differences.
The BLS data I cited above are based on a universal and hard currency.
VangelV, you haven't presented any proof BLS data are biased, one way or the other.
The people working at the BLS are technocrats, not politicians. They are mathematicians and economists, who have at least a 3.50 GPAs.
It's most likely the changes required to reflect the dynamic economy were too conservative. So, for example, inflation continues to be overstated, although by less.
Mark, I love your charts, but this one would have earned an F back when I was in college. Years covered by each bar need to be consistent. I suggest decades, the last years are of course high, productivity growth is always high during a recession (try comparing recessions?)
Cooper: That was a chart prepared by the BLS, I didn't pick the years for the bars. If I get time, I'll work on preparing my own chart(s) with different years for the bars.
The BLS data I cited above are based on a universal and hard currency.
I am sorry but I do not believe that they are based on gold. You better check again.
VangelV, you haven't presented any proof BLS data are biased, one way or the other.
I recall similar arguments about productivity claims by the BLS in the late 1990s. They were bogus.
This time around all we see is that in a terrible labour market employers can ask for more output without paying up for it. So? That is what happens in every recession and nobody was foolish enough to suggest that there was a meaningful productivity trend.
The bottom line is that there is nothing here to crow about for the optimists. At best they can argue that productivity can grow as a weak labour market forces workers to produce more with less. But it is hard to project that argument into a claim that once things improve employers will continue to be able to make the same demands. That leaves us with the 'productivity will keep going up because the labour markets will remain weak,' argument. I doubt that Mark and the rest of the naive optimists want to go there.
VangelV, when Saddam was captured, he didn't have Swiss francs, Japanese yen, Euros, or gold, he had U.S. dollars.
VangelV, when Saddam was captured, he didn't have Swiss francs, Japanese yen, Euros, or gold, he had U.S. dollars.
So? The fact that Saddam had dollars and that you did not find his gold or Swiss Francs does not change the fact that the USD is losing purchasing power and in a long term bear market. When Nixon defaulted an ounce of gold went for $45 or so. It is now up to $1,400. Notice the trend?
When it gets back to $1,300 or so buy as much as you can. Having missed the increase over the last decade it may be your best chance to protect your purchasing power over the next ten.
Vange, if the recent productivity surge from 2007 is "only" because of a weak labor market, what about the higher productivity from 2000-2007 and from 1990-2000? All driven by weak labor markets from the 1991 and 2002 recessions?
"Republicans have a big problem. Namely, the exponential progress of technology all but guarantees that there will be less work required to be done than there are people willing to do it. Yet our whole economic system is based on people getting jobs, getting paid and (hopefully) getting ahead. What do the Republicans say when the jobs just aren't there?"
Before you jump down my throat, I didn't write this. A highly successful and conservative technocrat friend did.
Hydra, why is this only a "problem" for Republicans? Do the Democrats not favor "people getting jobs, getting paid and (hopefully) getting ahead"? Oh yeah, that's right, they only favor taking from those who get ahead, scarfing up a big chunk for themselves, and then bribing the lazy to vote for them with whatever's left, I forgot. ;) First off, we've had exponential progress for centuries and the Chicken Littles have said "this time is finally the end of all jobs" during every recession in that period. Just as before, people will find stuff to do this time around. I think one big change we'll see is in the way work is structured: there's simply no need for most people to work 40+ hour weeks anymore. It's an artifact of our previous poverty and scheduling and technology limitations that don't exist anymore, yet the tradition blindly carries on. That's going to be one of the big changes coming, along with a largely telecommuting workforce.
I did not write it. A very staunch Republican did.
To answer your question, I would suggest that Republicans project the ideal that people should be responsible for themselves, which required a good work ethic, and work.
Liberals believe you can't just throw people in the trash, regardless of where the money comes from. Let them excavate a new grand canyon with teaspoons.
OK. Kill the forty hour week. Automate the menial jobs. Put Watson's in the call centers.
The question is, what happens when we don't need work.? When EVERYONE is on the Dole?
Who is throwing people in the trash? My deciding not to build a new home is throwing a construction worker in the trash? If the guy didn't save when times were good, that's his own fault. Now is the time for him to regroup and try something different. Of course, he won't do that because you Democrats victimize him and tell him he can't do anything else, so here, sit on unemployment benefits for two years and hope you get your old job back. Rather than encouraging him to try something else, the Democrats just want to create a culture of victimhood, all so they can extort more money from taxpayers and skim more off the top. As for your usual silly plaintive whine about what happens when all the work's gone, we all used to work in the fields a century ago, now almost none of us do. What ever have we done since, sitting around on the dole since then?
Vange, if the recent productivity surge from 2007 is "only" because of a weak labor market, what about the higher productivity from 2000-2007 and from 1990-2000? All driven by weak labor markets from the 1991 and 2002 recessions?
What are you talking about? There was no productivity miracle in the US from 2000-2007 and from 1990-2000. Statistical tricks like hedonic adjustments and accounting fraud did not change the reality. In 2001 Americans loaded up their balance sheets with debt to acquire houses that they could not afford and used them as ATM machines to fund high consumption. To have productivity increases you need to have capital accumulation, not high consumption.
And let us not forget that during the 'booming' 1990s the net worth of American households went down. How does that happen during a period of high productivity increases?
Let us go back to Bill Bonner. If I remember his book correctly the data he referenced showed that profits as a percentage of GDP peaked before the Vietnam War. They were just around 10% in 1963 and only around 3% in 2000. How does that happen if there really were productivity increases as you claim? And why did wages in the manufacturing sector stagnate for three decades if there really were capital accumulation that made workers as productive as Mark and others claim?
You are looking at a false picture that certainly does not fit the data or the economic theory. Here in the real world that can be fatal. I suggest that it is time to grow up and pay attention to all sides of the debate, not just the one that you want to be right.
The question is, what happens when we don't need work.? When EVERYONE is on the Dole?
Why can't people work if the economy is free? Look at the millions of new types of jobs that we have today that were not available a decade ago? Would you be happy if those jobs did not exist and we made trinkets instead?
Vange, I see, according to you, all productivity increases since the '60s were made up. Not sure what your point about high consumption is, nobody said consumption causes productivity. However, it can be a sign of productivity, because consumers have more to spend and are choosing to consume. And as I noted in another thread, "capital accumulation," by which you presumably mean physical goods or commodities, is no longer worthwhile. Intellectual capital, yes, but that doesn't seem to be what you're talking about. I haven't seen any stats showing household net worth going down during the '90s, the Fed's Z.1 releases show it unambiguously going up.
I realize that you read hacks who believe everything since the '80s is a mirage and that the trade deficit is a huge problem, but I think you need to take a critical eye to the nonsense they spew out. I can easily explain increasing productivity coinciding with lower profits: the market got more competitive. Workers' wages can easily stagnate if they were already overpaid and weren't producing the valuable part, ie the engineers who designed the processes and were very well paid. I suggest it is you retailing a conspiracy theory that doesn't hold up to the facts in the real world. I realize that there are "hard money" conspiracy theorists who constantly predict a resulting depression just about to come on; I suggest you wise up and realize these Chicken Littles have been wrong for many decades now.
Vange, I see, according to you, all productivity increases since the '60s were made up.
Not at all. I simply point out that productivity in the US is nowhere the levels it used to be in the past. While we have seen a great improvement in manufacturing as the introduction of quality programs and automation have made workers more productive the productivity in the overall economy has not gone up. If you look at the real economy you now see American workers stay longer on the job and work more hours in a year than they did before. You see women flooding into the workforce because they cannot afford to have the type of lifestyle that their parents could on a single salary. You see the productive class having to carry a bigger and bigger burden as they support a growing public sector which adds little extra value, if any, to the economy and to pay for the benefits received by the bottom 50%, who pay no federal income taxes.
Not sure what your point about high consumption is, nobody said consumption causes productivity.
My point is that to have high productivity you need real investment. That requires savings, which has been steadily going down as Americans have increased their consumption as a percentage of GDP.
However, it can be a sign of productivity, because consumers have more to spend and are choosing to consume.
As I said, productivity requires capital accumulation and that requires savings, not consumption.
And as I noted in another thread, "capital accumulation," by which you presumably mean physical goods or commodities, is no longer worthwhile.
Really? How do you make the things that you consume if you do not have the capital to make them?
Intellectual capital, yes, but that doesn't seem to be what you're talking about. I haven't seen any stats showing household net worth going down during the '90s, the Fed's Z.1 releases show it unambiguously going up
I will get the reference for you. I believe that I may have already provided the link to the book but I can do it again when I find my notes on the subject. The median household net worth in real terms did not do well in the 1990s. There were no gains even though stocks exploded during the period. I guess that is what happens when most people enter the markets late in the game right before it is time for everything to turn down. The same thing happened with housing but on that front it is easy to see the median household net worth go up. All that we have to see is the people who own far more on their mortgage than their homes are worth walk away.
Here's another:
http://www.bls.gov/lpc/prodybar.htm
Looks different than yours.
What say Benjamin?
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