Neither Confusing Nor Surprising: Q1’s Worst Productivity Ever, April Decline In Employed

The Establishment Survey was right in the (statistical) zone, so for most of the public the labor market looks good. However, as I pointed out last week, the “other” labor data pointed to potentially serious problems in April; first decline in it, and a big one, since April 2020!

While the Establishment Survey whistled past the productivity graveyard, the HH Survey did not (though, you can just bet, next month’s HH will be “good” again and then we’ll see).

Despite claims to the contrary, this was the second really bad quarter of productivity (like GDP) out of the previous three.

That’s not the worst part, either. Instead, it is how, very clearly, productivity in the US economy in the post-2008 world (those darn GFC thing-ies) only ever rises when businesses lay off millions upon millions. In case you’re wondering, this isn’t how healthy economies operate.

Productivity, though, isn’t just a set of interesting numbers, it tells us something about business profit potential as it relates to the use of labor.

Rather than laziness, what if productivity has remained low because revenues (output) never really rose nearly as much as businesses were repeatedly told to expect? Central bankers at the Fed always claim recovery and a robust one, maybe cautious firms carefully begin to add onto their payrolls anticipating (if somewhat skeptical) a plausible (sounding) boom.

But then it doesn’t boom.

Eventually, employers begin to recognize the primrose path.

The data is extremely uniform and clear as to this version of economic (small “e”) history. The first time this happened, Economists repeatedly insulted American workers, saying they were too drug-addled and too indolent for retraining (officials, for a time, even tried to blame Baby Boomer retirees until the data completely obliterated that attempt).

Perhaps there aren’t all these mythical jobs we constantly hear so much about? Couldn’t it be that US workers have a much better handle on the true economic state than the Ivory Tower Occupiers? Maybe, just maybe the economy they say recovered actually didn’t.

Twice.

Janet Yellen was so close to accepting this truth way back in 2014, before her Economist tendencies took back hold of her:

Ms. YELLEN. But when we see diminished labor force participation among prime-age men and women, that suggests something that is not just demographic. And so my personal view is that a portion of the decline in labor force participation we have seen is a kind of hidden slack or unemployment.

That won’t matter one bit to the heavily politicized FOMC. The unemployment rate covers the public picture, increasing confusion (somewhat on purpose), while the rate hikes continue – at least until the Euro$ puts another stop to them for reasons no one seems able to explain.

It isn’t actually that difficult, once you permit the possibility of permanent shocks (and the reasons for them). But that would require rethinking “central banking” and even the disaster that has become modern Economics. No wonder they insist on condemning you and me for everything.