The measure of employee output per hour decreased at a 1.9 percent annualized rate after a revised 2.1 percent drop in the prior three months, a Labor Department report showed Wednesday in Washington. The decline on average over the past two quarters was the biggest since the first six months of 1993. Expenses per worker increased more than projected at the start of the year.Why should you care? Long before I retired, even thick-headed old engineer me realized that the only absolute imperative in industry is to always Get More Done With Less. Again, why care? The only way that advanced economies, like ours and most of the western world, can compete against the much lower labor costs in the rest of the world is by being more productive. As Bill Bonner puts it:
The thing that separates rich societies from poor societies is productivity. It measures how much output you can get from each unit of input – mainly labor and capital.As proponents of the Information Theory of Money say, all our lives we've been told "time is money" but that's backwards: money is time. Time is strictly limited, the most valuable "possession" each of us ever has is our time here. The only way to build more wealth is to get more done in less time.
In the richer societies, a workman’s time is more valuable because he can produce more from each hour of labor. Since time is limited, the only hope of making material progress is to increase productivity.
So, it is no small matter when productivity growth comes to an end. Not to be alarmist about it, but if this trend persists, as we pointed out on Friday, it means the end of our civilization as we know it. And maybe even before the Fed completes its rate hikes!
At the very best, this is yet another sign of another recession getting started. Janet Yellen gave another of her tepid, 100% content-free speeches today. The economy is improving, but no rate hikes. We're keeping an eye on it. We're data driven. Yada yada yada. The economy has been improving for so long it ought it be freakin' perfection by now, right?
Back to Bill for the closeout.
Most economists (and politicians) have blamed world trade for stagnant U.S. wages. The median wage in China is only $8 a day. No wonder U.S. factory hands can’t catch a break; who can compete with that?So what gives? It's the free money coming from Fed - nothing else distorts the economy as badly. There's nothing more expensive than free money. The Germans don't have to put up with our Fed, so their wages actually go up. So keep an eye on the quarterly productivity numbers. This would be a really bad trend to have continue.
But Germans compete with the Chinese, too. And their wages have gone up! In real terms, after adjusting for inflation, wages in France and Germany have been going up at a 0.7% rate for the past 15-20 years.
Throughout most of the emerging market economies, wages went up… even though they all had to compete with the Chinese.
(I was going to put a stock photo here of some sort of factory, or office workers, but when I started looking at them, I started having bad flashbacks to when I was still working. I had to quit. Too many pictures of Mandatorily Interracial groups of workers, just like every stupid training class I had to take for the last 40 years.)