American Worker Productivity Drops (Again)

Economy recessionTyler Durden:  For the second quarter in a row, US worker productivity fell in Q1 (down 0.6% QoQ). Outside of 2015′s weather-driven debacle, this is the weakest two quarter tumble in productivity since Q4 2012.

Unit labor costs rose 4.5% QoQ in Q1 (revised up from 4.1%) as output actually fell 0.6% (implying a 3.9% rise in compensation).

This is the 3rd quarterly drop in output in a row.

Must be the weather?

As we detailed previously, the US became an unsustainable service sector based economy from the 1970s onward when service sector employment diverged from manufacturing without a corresponding boost in productivity.

Even Alan Greenspan has warned that America is “in trouble basically because productivity is dead in the water…” There are numerous reasons for this plunge in worker-productivity, from perverted inventories not to work to unintended consequences of monetary policy enabling zombies, but perhaps the most critical driver is exposed in the following dismal chart…

51% of total time spent on the Internet is on mobile devices – in 2015, first time ever mobile is #1 – to make a total of 5.6 hours per day snapchatting, face-booking, and selfing.

Source: @kpcb

So, while every effort can be made by Ivory Tower academics to solve the problem of American worker productivity, perhaps it can be summed up simply as “Put The Smart-Phone Down!”

As we detailed previously, adjusting for the WWII anomaly (which tells us that GDP is not a good measure of a country’s prosperity) US productivity growth peaked in 1972 – incidentally the year after Nixon took the US off gold.

The productivity decline witnessed ever since is unprecedented. Despite the short lived boom of the 1990s US productivity growth only average 1.2 per cent from 1975 up to today. If we isolate the last 15 years US productivity growth is on par with what an agrarian slave economy was able to achieve 200 years ago.

In addition, the last 15 years also saw an outsized contribution to GDP from finance. If we look at the US GDP by contribution from value added by industry we clearly see how finance stands out in what would otherwise have been an impressively diversified economy.

With hindsight we know that finance did more harm than good so we can conservatively deduct finance from the GDP calculations and by doing so we essentially end up with no growth per capita at all over a timespan of more than 15 years! US real GDP per capita less contribution from finance increased by an annual average of 0.3 per cent from 2000 to 2015. From 2008 the annual average has been negative 0.5 percent!

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