Estimated Productivity Report Meaningless

Bloomberg August 7, 2007 “U.S. Worker Productivity Probably Improved in Second Quarter”

“The Labor Department report is due at 8:30 a.m. in Washington. Estimates for productivity growth ranged from gains of 0.8 percent to 3 percent. Labor cost estimates ranged from a decline of 0.3 percent to an increase of 3 percent.” That big “probably” certainly deserves a headline. NOT

Productivity can be defined in two basic ways:

Labor productivity, is simply output divided by the number of workers.
Output divided by the number of hours worked.

The nation can boost productivity—either by investing a bigger share of National Income in plant and equipment or by finding new ways to increase efficiency.

Gross National Income (GNI) comprises the total value of goods and services produced within a country (i.e. its Gross Domestic Product), together with its income received from other countries (notably interest and dividends), less similar payments made to other countries.

For example, if a British-owned company operating in another country sends some of its income (profits) back to the United Kingdom (UK), the UK’s GNI is enhanced. Similarly, the repatriation (returned to US) of profit from a US owned company operating in the UK, will count towards US GNI, but not count towards UK GNI.

That tells me “not as many people have jobs, or they are working fewer hours”. Does the current national income reflect increased spending on consumer goods or the reduction of labor costs and benefits to jobs lost to off shoring? You may wonder what this has to do with mortgages, but loss of income is the first reason people can not make their payments.