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The U.S. employment picture isn't pretty. At 10%, the unemployment rate is at its highest level in nearly three decades, and it's expected to move higher. American employers cut 4.2 million jobs last year, and nearly 15.3 million people are unemployed.
Those bemoaning the increase in U.S. joblessness are right to do so. But they should also remember that unemployment is a direct result of the U.S. economy's greatest strengths - its ability to grow productivity even in a recession.
The Conference Board publishes a Total Economy Database, which gives productivity growth figures - nearly 50 years' worth, in some cases - for most of the world's major economies. The results for 2009 were just released. And the Conference Board's conclusion jumps right off the page at you: The U.S. economy is nowhere near as bad off as many pessimists believe.
In the U.S. economy's bid to rebound in this post-financial-crisis world, productivity growth may be this country's secret weapon.
Productivity growth is damned important to investors. Countries with high productivity growth - like China and most of East Asia - become steadily more muscular exporters. Thus, companies from those countries tend to enjoy a growth in market share and profitability that can provide truly stellar returns for investors. Conversely, companies from countries with inferior productivity growth (Italy and Mexico come to mind) tend to find that life as an exporter becomes steadily more difficult: Their costs soar and profits drop at a faster pace than any of their rivals.There's a clear lesson here: If you're looking for profits, put your money where the productivity growth is healthiest.
That's why last year's heavy U.S. layoffs - in the long run - may end up being good news. U.S. gross domestic product (GDP) declined by about 2.5% during the year, according to Conference Board estimates. However, U.S. employment declined by 3.6% and hours worked declined by 1.5%, so the labor input to U.S. production declined by 5.0% (after rounding). If the input declines 5% and the output declines by only 2.5%, productivity has risen by 2.5%. It's the most painful form of productivity growth in the known universe, but it's still real growth.
The wimps in Europe didn't do nearly as well. The output of the Eurozone (the 15 countries that use the euro) dropped, too, by 4.1%. But the region's employment dropped only 1.9% and its hours worked fell1.2%, so productivity fell by 1%. In Japan, output dropped more sharply - by 5.6% - but productivity rose by 0.3% as employment and hours worked dropped sharply. So overall, during the year, the United Statesbecame 3.5% more competitive against the Eurozone, and 2.2% more competitive against Japan.
Overall, global productivity fell by 1% during 2009. Although this was the first such drop since 1991, last year's decline was larger than the 0.1% fall that took place that year. Productivity dropped in rich countries, but rose sharply in some emerging markets. China, of course, was the leader, with productivity surging 8.2%., while India's productivity increased a healthy 3.9%. As for the other two "BRIC" countries: Brazil experienced a disappointing 1.5% increase, while Russia's productivity fell 3.6% (it's a good thing Russia has oil and nukes ... otherwise nobody would take it seriously).
Of course, a single year's figures don't mean a whole lot; it's the long-term trend that counts. Over the long term, emerging-market productivity is growing much faster than rich-country productivity. And that makes sense as newly capitalist markets start to learn and even embrace Western business techniques and catch up with our living standards. That means Western countries, particularly those with relatively poor productivity growth, will feel the chill of competition from China and other emerging markets in years to come. Italy, in particular, has done notably worse than other European countries ever since 1995, and is now suffering from its un-competitiveness. Mexico, too, which as a relatively poor country should be growing productivity at emerging-market rates. But it is notably failing to do so, and instead is experiencing even slower productivity growth than Western Europe.
Over this longer term, the United States' record is good, but not stellar. In 1995-2005, the country saw its productivity advance at a pace that was only a little faster than that of Europe - or at roughly the same rate as Japan.
The lesson we learn here: The so-called "productivity miracle" of the late 1990s so beloved by former U.S. Federal Reserve Chairman Alan Greenspan was mostly hype.
Since 2005, EU productivity growth has slowed somewhat, except in some of the more-dynamic economies of Eastern Europe.Overall, however, there's no reason to expect Western European productivity to expand more rapidly in the recovery than U.S. productivity, so the lead taken by the United States in the recession may persist.
That's good news for U.S. investors. As for those in Europe, Asia and elsewhere who are prophesizing the "inevitable" U.S. decline? Well, we can only say that there's no sign of it yet!
News and Related Story Links:
- Money Morning News Analysis:
Latest Unemployment Numbers Prove There's No Easy Way Out of a "Jobless Recovery" - The Conference Board:
Official Web Site
- MSNBC.com:
Obama: 'Road to recovery is never straight'
Sadly, the government's numbers on productivity are bogus, so don't kid yourself. For example, let's say a U.S. company sources 40% of its parts from overseas to assemble some product. Then it finds a supplier in China that can combine some components and ship them to the company for less. The company's foreign sourced parts now go to 50%. The new imports allow the company to lay off 5% of its workers. The government shows this as an increase in productivity. But our economy is now worse off than ever.
Based on how the government derives its statistics, the economy will only fully recover when we make more of our own stuff, and the government shows falling productivity (sarcasm intended).
Very good analysis.
Anyway, whose figures may one trust nowadays? No difference where they come from, all official statistics are massaged.
Not sure about all those figures because it is a fact that the US doctors all figures. And unemployment is actually at 22% not 10% as they say. And what about NAFTA and GAT. these bills do nothing but send our businesses over seas. We have lost almost every major business to the slave labor wages of other countries. Our imports are 75%. we consume 25% of the resources of the planet yet we only account for 5% of the population. And what about the next wave of Alta A and these other ridiculous mortgages that we written now about to reset without chance of remortgage. There is also nowhere to run for the government. They cant lower interest rates. Even if we tax 100% of corporate and individuals wages we would still be running a deficit. The government and banks have painted us into a corner truly and there is no way out. All they can do is stimulate by printing more money which creates inflation and take us into more wars
I hate to be the pessimist but the above article does not take these extremely important things into account.
As long as we do not have tariffs are obs are going over seas, and thats a fact. Change must come from our wallets and what we buy. not by some belief in government to bail us out, they are destroying us!
Nobody with their head screwed on right believes the stats published by the government.
But in one respect the Feds have become more productive for ambidexterity. In that one arm of the government prints $ madly to buy the debt from the other arm of government.
I have been out of work since December 2008 after working in the pharma industry for 20 years. I'm experienced, educated, and technically advanced. That being said I have no idea what this author is writing about. No one can speak a recovery into being just by writing an optimistic article. No one has a chrystal ball, no one knows the future. Was Hutchinson writing articles in early 2008 about the worst crash to occur since the great depression?
I'm shocked at the manner in which you ignore the plight of the unemployed and as long as they are ignored by this me, me ,me wall street inherited self-indulgence America is doomed economically. Further, I'd venture to say that at some point the rich could well find themselves on the chopping block of history. You too easily dismiss the pain of those millions who have, through little fault of there own, become victims of the me, me, me obsession. Smart too soon. Wise too late.
In a world of unemployment issues, the question is not "how much can we produce?", but "How can we produce what everyone needs?"
People don't need jobs. They don't need statistics. They need food and exercise, yet every fiber of the modern civilized culture has been geared toward eliminating the "drudgery" of farm work and replacing people with petroleum-based logistics and poisons.
We hear about the horrors of the 'health' care system, unemployment, contaminated food recalls, etc etc etc.
Does nobody stop to think that maybe constantly eliminating manual labor IS the problem? If people don't have something valuable to add to the land/planet, then why are we working so hard to keep them all employed at jobs that simply consume things?
The Myth of Progress is directly related to the Myth of Productivity.
You are playing with very small numbers in percentages that are not significant in the grand scheme of things and are irrelevant when you consider the actual quality and meaning of the data you are using. GDP is the amount we spend. It consists of debt as well as cash expenditures by Gov and citizens. The debt spending is the problem and makes your argument for productivity gains irrelevant. Sorry for being cynical but the productivity of a service economy that is only growing at distributing foreign made products and making pizzas will not help. The correct measure of productivity is simple, how much more do you export than you import. The US imports $600 billion dollars a year than we export so we are becoming poorer….wealth is leaving the country. Thats the bottom line. We have to make other products the rest of the world wants to buy or make our own. The current economic situation is unsustainable. If you divide our trade deficit $600b by the population 300m and you get $2000 for every American that is going oversees into the pockets of our trade partners. Now consider the additional debt that Americans are taking on every year and the additional debt that our government is taking on every year $1.4t divided by 300m Americans is $4,600 dollars for every American that our government is taking on in debt. Next consider the existing government debt of $12t divided by 300m Americans is $39k per American. Americans real incomes will continue to decrease until we are a positive force in the world economy and not a debtor nation. The rate at which the government has been devalueing the dollar by printing money and infusing capial into our ecenomy and banking system…has further eroded Americans purchasing power with the dollar..now you see the picture of a governement and people that are going bankrupt. This is not turning around until we export more than we import….thats the bottom line. The American population as a whole is screwed. The future is about globalization of companies that were once national entities that contributed to national wealth becoming global entities contributing to stockholders wealth. Its a good time in world history to be an investor or a wealthy person. Its a really bad time to be a middle class American toiling away as your income and life as you knew it deteriorates. Miiddle class Americans life and world are changing for a much lower standard of living. Yes we will become more productive….we will make less live on less….and produce more until our average wages are on par with the Chinese and the rest of the poorer people on the planet.
I totally agree with you Fred.
I totally agree with you Fred. Ask yourselves; how many products made from overseas do you buy everyday and why? Because they are cheaper, right? And why are they cheaper, because their labor rate is very low. How can we export and be competitive in the world market if our Unions demands higher and higher salaries? Who will buy our products? Anyway, do we still have manufacturers? Simple logic will give us the answer.
Marie; BRAVO !!! > My Family have been Employed for Over 40 Years in a Manufacturing Business that has Been in Existance for Over 90 Years, Up Until 5 Years Ago they had employed Over 500 Employees, Since then the Co. Started to Import the Metal Lamp Parts needed to Construct the Light Fixturers, Hense the Workers have been Reduced to 1 (my Brother-in-law) Employee ! * Now, as of this Date, the Entire Business is Shutting Down in the Nex Two Weeks !!!
*** All I Know is that as we were Growing up, my Farther was the Only Worker in a Family of 5 People, Earning a $1.25 per Hour. we Owned a House,a Car, Had Food,Clothing,a Bank Account, not to mention several weeks of Vacation every Year ! Why ? cause: Houses were $3,000 to $5,000, New Cars were $1,500 each, Shoes & Sneekers were $2.00 to $5.00 a Pair, Etc ! Oh Yea, No Credit Cards ! ( you Bought when you Saved the Money !) Guess what People > Every time you People want to Live Like (which it does not work like that !) the Jones, and Ask for a Raise, where do you think your Employer gets the Money ? He has to raise the Product Cost !Then you want another Raise… and so-on and so-on. NOT everyone can be a Boss! And they have the Right to make More Money , there giving you a JOB ! To Sum this All up… the Self Inflicted Demise and Fall of the U S is caused by GREED! And that goes for All of YOU !
the challenge is to export to China !!!! the key is the enforcement of intellectual property rights – where the USA excels, the enforcement another as yet unresolved issue
national external debt is in effect a federal mortgage – should be related to current average wage (taxable income) in capacity to feasibly repay – being credible is the real issue (credit rating)
Speaking of bogus Gov numbers, why keep using 10-12% as the unemployed? The real scary
number of unemployed is about 18%, lets be honest, of course this sounds really bad too.
If I had a magic wand for this many jobless persons instead of a little project here and there, it
might be a great Idea to put the masses of unemployed to work on depression #1 type W.P.A.
jobs. We've got lots of potholes to fill and walls to build ! A job at min wage is better than NO
job if you're hungry.
This whole analysis is so near-sighted and is the typical, tunnel-vision view of the wealthy investor.
So if the emerging economies learn the ways of becoming more robust exporters, what happens if the export markets are weakened by high unemployment and net higher productivity of some kind? It seems like a lose-lose proposition to me. Why not figure out (analyze) how to get full employment with self-sustaining growth in producing things the human race needs to survive on this planet?
yes indeed – sort of internal foreign aid !!! makes sense – the poor spend excess on local produce – collectively much better for an economy in downturn – whereas the rich spend excess on imported goods ie look at stereotypical car purchases
sort of like internal foreign aid – why not ???
the country gets value for services rendered – the road verges weeded is morale boosting – and the long term unemployed keep a good job history
win, win, win
just a matter of reinvesting a small % of the debt repayments from the bailed out banks
Productivity correlates to productions levels as a percentage of capacity and presently we are only at 71% in the manufacturing sector. I highly doubt that government figures have a discounted factor and consequently skews the numbers.
All good comments above – with the consensus strongly skeptical of this article's assertions. What Ivory Tower is Hutchinson in? He sounds as disconnected from reality as the hype and spin out of DC.
At least Bernie's ponzi game generated real $. Fraudulent means but real currency. Our ponzi economy prints bogus $ to cover bills quickly spinning out of control. GDP fuelled by 75% personal domestic consumption by giving credit to most anyone with a pulse. Juiced by values such as "imputed benefits" (translation – pick a number).
Back room trillion $ bailouts to Wall St hoods and banksters. A Fed that refuses to allow itself to be audited. A tax dodger running the US Treasury. Professional bribers, er lobbyists that craft or kill legislation in a totally self serving manner. With most politicians on the take one way or the other.
Vote out all incumbents in the upcoming mid terms. New dance card with new rules.
Martin, have you considered outsourcing and its impact on this? Has the outsourcing of jobs resulted in "productivity" gains? Even if they have, at what cost? Does it make our country better off when jobs are outsourced even if it raises the profit margins of companies? These issues are articulated much better in a 2006/2007 paper by Susan Houseman of the W. E. Upjohn Institute for Employment Research. Following is her introductory paragraph, which I believe is a good summary:
"I discuss reasons why manufacturing productivity statistics should be interpreted with caution in light of the recent growth of domestic and foreign outsourcing and offshoring. First, outsourcing and offshoring are poorly measured in U.S. statistics, and poor measurement may impart a significant bias to manufacturing and, where offshoring is involved, aggregate productivity statistics. Second, companies often outsource or offshore work to take advantage of cheap (relative to their output) labor, and such cost savings are counted as productivity gains, even in multifactor productivity calculations. This fact has potentially important implications for the interpretation of productivity statistics. Whether, for instance, productivity growth derives from a better-educated, more efficient U.S. workforce, from investment in capital equipment in U.S. establishments, or from the use of cheap foreign labor affects how productivity gains are distributed among workers and firms in the short term and undoubtedly matters for U.S. industrial competitiveness and living standards in the long term. Although it is impossible to fully assess the impact that mismeasurement and cost savings from outsourcing and offshoring have had on measured productivity growth in manufacturing, I point to several pieces of evidence that suggest it is significant, and I argue that these issues warrant serious attention."
I am very impressed with the quality and depth of informatiion provided in the above responses. I hope that Martin will read each one and then give us his revised analysis about US productivity gains. Our President is hyping current productivity gains today in his question and answer session in the media. His supposed facts are just wrong!
GOOD ARTICLE,AMERICAN PRODUCTIVITY IS VERY GOOD,I´M AN INDUSTRIAL ENGINEER AND KNOW THE SUBJECT,THE REAL LONG TERM SOLUCTION IS THAT IT HAS TO GET BETTER IF WE ARE TO SUCCESSFULLY COMPETE INTERNATIONALLY.
MORE MATH AND TECH. TRAINING IS A MUST FOR THE CURRENT GENERATION,I ALSO THINK THAT THE CURRENT EMPLOYMENT SITUATION IS MORE THE FAULT OF MANAGEMENT,TOO GREEDY FOR PROFITS AND TOO UNREALISTIC ON DEMANDS PLACED
ON THE WORKFORCE. AN EXAMPLE IS THE "TEMPS",USED TO NOT HIRE PEOPLE FULL TIME,
IT COST THE COMPANY PRODUCTIVITY,COST MORE SINCE YOU HAVE TO TRAIN THE TEMPS EVERY TIME A NEW ONE APPEARS,COST FULLTIME EMPLOYMENT AND WHO GETS THE BONUS: THE MANAGER.BUT THE FIRM IS REALLY LOOSING LONG TERM ADVANTAGES
THAT EVENTUALLY CATCH-UP-THUS THE RECESSION OR NEAR DEPRESSION.
ARMANDO
US productivity may be up but without some major investment it will not continue. Without some steady and encouraging tax policy that will not happen.
Productivity statistics in the US have been skewed for years. Why? Too many people working off the books, especially illegal aliens. If you add in the massive numbers of people working off the books, productivity actually goes to H in a handbasket.
You Americans have to stand for your country and your constitution. Obama is going to lead you guys down the road towards socialism, by expanding government and raising all your taxes. Investment will be so hard for entrepeneurs because of bureacracy and b.s. The free market and capitilism is what got you to being known as the land of opportunity, not bigger government. I am a Canadian and I enjoy having you guys as my neighbours. Start with voting real free market economists into office like Peter Schiff from Connecticut. Cut government spending, lower taxes and let the free market work it's magic and in a couple of years you guys will be miles ahead of everyone else. Good luck from your neighbour to the north!!!
I agree with you 100%, the only detail to have in mind is that free market went down the tube when it became take it by the corporatocracy world.
If you keep buying foreign products, be prepared to work for foreign wages. If you have a foreign car and you are unemployed, then you shouldn't complain.
Since America’s economics when from a productive one to a financial one, Isn’t that now it is making its revenues from lending money abroad via IMF?
I am from Slovakia- this about raising US- productivity is probably, as many of YOU US- citizens wrote here- a governement massage- but You lived a long time on the expenses of the other world- and now the bill fo it came, so do not wonde?r, what happens. Mr. Obama does for You what he can- and it is not very much, he can do for Yoz now.
Stop making wars abroad, stop military spending and You will see- something wil be better for You- but not for Your wealthy class, which is using You for their purpose without You are knowing about.
I wih You good luck in recovering the USA- but without bushism and things like that…
Calling on voters to cast their government ballots for " free and fair " markets is an oxymoron since there are not nearly enough voters nor politicians who would understand that Austrian economic necessity . Ignorance is a most blissfull narcotic .
the productivity factor indeed is an often neglected but very important factor. This article duly brings the factor to attention. There are two major flaws though. One it compares the increases in productivity in the different countries as such. We all know the stellar growth figures that China every year impresses the worls with. But it s easily forgotten that inland china, there still are millions of people working at a dollar and so a day.If one of these guys ùpves to Shenzen, and suddenly makes 10 dollars a day, then you got impressive increases, but still overall poverty.
You see having a population of 1.3 billion people and only be a slightly larger exporter than germany with 80 million people, in the end, isn t that spectacular. (and that even at lower wages)
Secondly, as you said Italy is a prime exam^ple on the way down. It s part of the eurozone.
But if you look at absolute figures, and look at the list of most productive zones in the world today, the number one is Norway, number two Denmark, and number three Belgium, all in the eurozone, and yes all tiny countries. The three together, about 20 million people.
All 3 stable democracies, high wages, high taxes, universal health care , and exporting more than half of their GDP. each of them have stable stock exchanges, and most of the listed
companies are tiny compared to american standards, and thus mostly not followed by investment advisors
but then, and here is my suggestion. if hidden gems is really looking at hidden gems they don t look at the eurozone as a whole, but they look at the gems in detail
and if productivity is, with reason, an important factor, the go looking in these countries with the highest productivity.
and one thing more, as a plus you put a fence against the risk of depreciation of the us dollar
the norvegian crown on top is the currency of a major oil exporting dollar.
thor bergers
Only 4 things generate new wealth:
Agriculture & food preparation
Construction
Mining including oil
Manufacturing
All the rest simply cycle the wealth which is either consumed or decays over time, so economies not generating replacement wealth decline. No wealth is created by printing money, but the printer gets buying power advantage and malinvestment and control occurs.
Norway has done an excellent job of developing offshore deep water oil extraction, plus the technology and equipment used globally, with government support; thus wealth and the economy has expanded.
In the US however, government for 35 years has limited offshore drilling and onshore refining and nuclear power production which prevented us from using and exporting diesel and electric power which would have been a great generator of new wealth.
US currency inflation, taxation and regulation have squandered the capital needed for new growth. These plus government abetting litigation has driven a large amount of manufacturing, the previous gorilla of US wealth generation, off shore. Our myopic politicians and something for nothing voters almost have us bankrupt.
The good news is teaparty demonstrations of unpaid marchers have erupted by liberty loving constitutionalists. Will the movement for individual State power grow or be co-opted? Maybe we need to split into Norway size countries where power and common sense can be controlled by the electorate.
As it is clear to all those who ever take serious and honest thought about the general economic problems facing the world today and the ever rising unemployment problem of the world in particular, the main concern is not that of productivity at all. The problem has more to do with organization and management of world resources and distribution. Clear and simple. Capitalism has no answer to that problem, and will never have any. The reason is simple. Capitalism, and American style capitalism, the type being advocated by the Tea Party and the Republican Party in particular, is against such regulation, control, and supervision that are known to be indispensable for proper, effective, and efficient management and coordination of any relatively large organization. Running states, nations, countries, cities, towns, counties, regions and districts require such organizational techniques for large organizations for internal, inter-organizational, and trans-organizational management. That fact is well known to and, indeed, called for in the business community, especially by weaker members that risk being trampled under by the strong ones. The heydays of capitalism when the system helped to advance human development and promote welfare are now over. There are no more virgin lands or Virginias where the weak the 'have nots' of the powerful nations can be pushed to for their own basic survival. It is time for proper organizational control, regulation, exploitation, distribution and management of global resources for the benefits of all.
Perhaps, I missed it, but, I would like to see a bar or line chart with your estimates of American Productivity over the past two or three decades relative to Europe, Japan, Russia, South America, Southeast Asia, Australia, and the rest of the world.
This definition of "productivity" accurately accounts for the fact that Americans are taking pay cuts to do the same work, or are simply fired while their former co-workers (or replacements in China) work harder to maintain the same output. Real growth has been crippled by Wall Street cheats.