The U.S. worker was 8.1% more productive in Q3 -- an astonishing improvement, not least because it follows a 7% mprovement in Q2. It makes you think that all the promised benefits from 1990s business investment in computer software and hardware must finally be paying off. As in, people are figuring out how to use all that stuff.
Not all economists agree. The bearish Stephen Roach, Chief Economist and Director of Global Equity Analysis at Morgan Stanley (NYSE:MWD) told The Wall Street Journal that it's just more people in service industries working overtime. Hmm. Don't most of us know that working longer hours makes us less productive? Maybe not Roach, who probably makes in an hour what we do in a week, so maybe can still do well at half tilt.
But increasing productivity helps explain why GDP grows yet unemployment remains stagnant. Businesses do more with fewer workers. Think of all those airline kiosks where more and more of us do our own check in and seat selection -- if we haven't already printed our boarding passes at home on the computer! Fewer employees, more productivity.
The macroeconomic view is that labor moves around to its best and most productive use, and that even if the short-term result is dislocation and discomfort, in the long run it means more employment for more people -- and more tax revenue for the government, but we're not going there. (You can, though, by joining our ongoing discussion of Economy & Markets!)
And as painful as it can be, free-market capitalism certainly beats every example of a centrally planned economy one can think of. The goal is to retain compassion and provide all possible incentives and opportunities for people to retrain and move on without ripping apart the fragile social fabric that binds our nation.
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