One of the bright spots in the recent GDP reports has been the productivity figures. Whenever GDP continues to grow even as employment is falling, productivity — which is the growth in GDP per worker — will look particularly strong. And productivity this year is rising at a healthy 2.5% pace.
Brian Blackstone explains in the WSJ that the news on productivity helps out the Fed:
Strong productivity growth, by countering inflation pressures from energy and commodities, allows the U.S. Federal Reserve to keep interest rates lower than it otherwise might, helping it stoke the economy.
But Dean Baker is having none of it:
Perhaps, the last few quarters haven’t been bad, but the record since the second quarter of 2004 is pretty dismal. Productivity growth has averaged less than 1.7 percent annually. This is only a bit higher than the 1.5 percent annual rate during the long slowdown from 1973-1995.
Dean did not choose the second quarter of 2004 arbitrarily here. Since productivity growth is rising, it’s now the highest it’s been since, um, the first quarter of 2004. So productivity growth since the second quarter of 2004 is sure to be lower than productivity growth this year.
More to the point, Dean’s lowball 1.7% figure is a vast improvement on what it was only a year ago. Here’s his complaint from this time last year:
The release of revised data puts productivity growth over the last three years at 1.2 percent annually. This is below the 1.5 percent rate of the long 1973-1995 productivity slowdown… This is REALLY big news.
If medium-term productivity growth has risen from 1.2% to 1.7% in the space of one year, that’s good news, no?
In any case, productivity numbers are very noisy things. Check out the chart at the bottom of Blackstone’s article: productivity spiked up and down all over the place between 1973 and 1995, from a high of over 5% in 1983 to lows of -2% in 1974 and 1982. Yes, you can take the average of all those figures and come out with a +1.5% baseline. But I’m not sure how useful that number really is.
I’m not overjoyed by the productivity numbers, because to a large extent they’re just another way of framing the atrocious employment situation. But I don’t think it’s fair to say that they’re "dismal".