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  • US Worker Productivity In Serious Decline -- The Reasons Why

    The Labor Department reported earlier this month that US worker productivity, which measures hourly worker output, declined for the third consecutive quarter at the end of June, the worst showing since the late 1970s. The productivity rate also declined for the 12 months ended June. This news came as a surprise to most forecasters who were sure that the productivity rate would have snapped back strongly in the 2Q.

    There is near-universal agreement among economists that worker productivity is the most important determinant in whether our incomes and living standards rise or fall over the years. If productivity continues to fall, the economy will be hamstrung, incomes will stagnate and our living standards will deteriorate in the years ahead.

    Interestingly, there is not near-universal agreement on what is causing the current extended period of falling productivity, nor what should be done to reverse this critical trend. Today I will devote this space to explaining why productivity is moving in the wrong direction and what should, and should not, be done about it.

    Given the enormous impact productivity has on our economy, our incomes and our living standards, I would hope that more Americans understand this issue better before they head to the polls in what will be the most critical presidential election in many years. Therefore, feel free to forward today’s E-Letter to as many people as you see fit.

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  • Why Household Income Is Down Five Years Straight

    Between 1999 and 2012, the average US household lost over 9% in income. According to the Census Bureau, the median household income was $51,017 in 2012, compared to $55,080 at the peak in 1999. In short, most Americans are working harder but earning less. Today, we’ll look at the data and discuss why this trend continues even though the economy is in a slow recovery.

    In a similar pattern, growth in US worker productivity is also in decline. Productivity grew only 1.5% in 2012 versus 3.3% in 2010. So far this year, productivity is up only 1.9%. While that’s a modest improvement over last year, it’s still quite low. We’ll take a closer look at this problem as we go along today.

    The Bureau of Labor Statistics recently reported that there are over 27 million Americans who are “under-employed.” These Americans include those who are officially considered unemployed, plus involuntary part-time workers and “marginally-attached” workers – those who have not looked for work within the last four weeks. That is a new record high. And you’ll also be saddened to learn that almost half of college graduates work in jobs that do not require a college degree.

    But before we delve into the topics above, I want to alert you to two key economic reports that will be out this week. The second revision of 3Q GDP will be out on Thursday morning, and the November unemployment rate will be announced on Friday. I’ll tell you what to look for below.

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  • Are We Sure the Recession is Really Over?

    The announcement on October 29 that 3Q GDP surged 3.5% was seen as a confirmation that the recession is over. However, a closer examination of that report reveals that it was still a disappointing quarter for the economy, especially considering how much government spending contributed to the gain... The government reported last week that US worker productivity surged to the highest level in six years in the 3Q. Normally rising productivity is a good thing but this time, much of the increase is due to massive layoffs -- fewer workers are having to do more work -- and many companies are laying off the best and brightest, such as scientists and engineers... The unemployment rate surged to 10.2% in October, the worst in a quarter century.

    This week, we will examine all these issues at length, plus I have included a very worrisome analysis from economic forecaster Nouriel Roubini regarding the US dollar and what he sees as the next credit crisis on the horizon. Finally, I have included an article from the Wall Street Journal that lists the most insidious parts of the new healthcare bill that just passed - prepare to get very angry!

    Finally, our thoughts and prayers go out to all of the families of the innocent soldiers who were killed and injured in the tragedy at Fort Hood that occurred on November 5.

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