Last week I posted an item that I titled "A Good Productivity Report That Pleased Nobody," wherein I indicated that I couldn't find anyone with a positive view of said report. I was referring to the unit labor cost data, but I probably should have noted there was indeed positive commentary to be found on the productivity part of the productivity news. From Brad DeLong:
Another excellent productivity growth quarter...
The "new economy" is very much alive--much more alive than I would have dared to forecast it would be back in 2000.
Looking back, this makes me quite proud of: "Productivity Growth in the 2000s."
Bloomberg's Matthew Benjamin -- in an article I discovered via Amity Shlaes -- concurs:
For the past five years, productivity - a measure of employee efficiency - raced ahead at an annual rate of 3.3 percent, almost double the clip of the previous quarter century. Based on past economic expansions, that trend should be about played out by now, as companies run out of ways to wring more output from their work forces.
Not this time. Instead, after falling for the first time in five years at the end of 2005, productivity came roaring back in the first quarter, economists expect a U.S. Labor Department report this week to show.
All right, but isn't it OK to still worry about unit labor costs? Maybe, but my astute readers offered some words of wisdom in the comment section to the aforementioned post. While jeff senses a bit of group think, Spencer advises...
I am always extremely careful about using the quarterly compensation data. I suspect the seasonal adjusment is not that good -- the quarterly data is highly volatile and follows no reasonable pattern.
But the year over year growth in compensation has slowed significantly. Moreover, if you look at the Employment Cost Index you see a very sharp slowing in the growth of fringe benefits -- especially health insurance costs.
...knzn warns...
It seems to me that both the good productivity number and the bad labor cost number need to be taken with a grain of salt. The divergence from other data sources (for example, the employment cost index, which surprised on the low side in Q1) suggests that the effects we see in the productivity report may be due to composition effects.
... and fred.c.dobbs observes:
I remember Greenspan touting [the nonfinancial corporate sector] series as a better gauge of underlying productivity. Those figures showed much greater productivity (5% for the year) and much less compensation pressure (down 2% for the quarter and up just 0.5% for the year).
Wow. Great comments all. On this beautiful Northeast Oho afternoon, I'll take this is an excuse to feel just a little chipper.