It was the third consecutive quarter of falling productivity, the longest streak since 1979. On a year-on-year basis, the productivity fell 0.4 percent, the first annual decline since the second quarter of 2013.1979 was, of course, Jimmy Carter's term, a period when terms like malaise, stagflation (a mix of price inflation, high unemployment, with low or no growth) and the misery index were being talked about. Perhaps not coincidentally, the labor force participation rate stubbornly stays under 63%, 62.8% according to the July jobs report, the lowest the labor participation rate has been since those Jimmy Carter years.
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.Underscoring the importance of this number, Fed Head Janet Yellen said it was one of her major concerns. Yet more evidence the economy will never return to normal as long as the Fed keeps jacking the money supply around; there's always a reason not to let things recover.
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.
Federal Reserve Chair Janet Yellen said in June that the outlook for productivity growth was a key uncertainty for the U.S. economy and a key determinant of improvements in living standards.The reasons being cited for the three successive quarter decline in productivity varied largely with whether or not the comments came from someone who is more or less an apologist for the status quo, like Jim Paulsen who says that everything is really fine, it's just that the way we're measuring it isn't right anymore ... suddenly... inexplicably... although it worked until a few months ago. Peter Schiff, a well-known "real money" guy thinks the reason is Janet Yellen and the rest of the central bankers.
Ultra low interest rates have encouraged businesses to borrow money to spend on share buybacks, debt refinancing, and dividends. They have also encouraged financial speculation in the stock market, the bond market, and in real estate. Investors may believe that central bankers will not allow any of those markets to fall as such declines could tip the already teetering global economies into recession. The Fed, the Bank of England, the Bank of Japan, and the European Central Bank have already telegraphed that they will be the lenders and buyers of last resort. These commitments have turned many investments into “no lose” propositions. Why take a chance on R&D when you can buy a risk free bond?Anyone who has read just about anything I've ever written with the "economics" tag will know I'm no fan of the fake money regime the central banks force us to live under, but I'm going to ignore them today. I want to suggest something I don't see being talked about as an issue: regulation - another of my hot buttons. Your friendly Fed.Gov minions at Regulations.gov report that they've issued 6,180 regulations in the last 90 days. Since I started watching that site in 2012, they've issued over 6000 new regulations every 90 days. A little arithmetic shows that if they've been doing that since 2009, when Obama took office, 2761 days ago, at least 180,000 new regulations have been issued. Not all of them will affect every business' productivity. Some of them are low impact, affecting only very specific things. No agency ever really considers the regulatory burden they impose on businesses; these are real costs. Some of them end up taking real employees time away from their jobs, which automatically damages productivity.
If we're looking to figure out what's reducing productivity; what's gumming up the metaphorical gears of American industry, might I suggest we start looking here?