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2021-12-08 16:16 by Karl Denninger
in Macro Factors , 1046 references Ignore this thread
Productivity And Costs
[Comments enabled]

Gee, what might be going on here?

Nonfarm business sector labor productivity decreased 5.2 percent in the third quarter of 2021, the U.S. Bureau of Labor Statistics reported today, as output increased 1.8 percent and hours worked increased 7.4 percent. This is the largest decline in quarterly productivity since the second quarter of 1960, when the measure decreased 6.1 percent.

Well now that's bad.

Unit labor costs in the nonfarm business sector increased at an annual rate of 9.6 percent in the third quarter of 2021, reflecting a 3.9-percent increase in hourly compensation and a 5.2-percent decrease in productivity.

That's worse.

It appears that mentioning why I think that might be the case is cause for a robot to find it (and yes, I know its a robot too, and I'm not about to tell anyone how or why) and "auto-report" it as "derogatory or misleading."  So I won't.

I will simply observe that a nearly 10% increase in operating costs for labor is unsustainable.  It will of course drive price increases just as labor cost-push always has in the past, because for most businesses labor cost is the largest, or one of the largest, elements in their budget.  For a service-oriented business it frequently is is the highest cost item where for manufacturing there are plenty of times that it isn't (raw materials can, in some cases, be very expensive.)

Interestingly enough hours worked and labor cost-per-hour is not translating into more output.  It's supposed to of course, but isn't.

Productivity is a simple definition: How much do you get out for whatever you put in?

More is going in, but what's coming out is not tracking the input.

That's a problem.

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