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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: AC Flyer who wrote (20712)7/3/2002 6:17:42 PM
From: Don Lloyd  Read Replies (1) of 74559
 
AC -

Productivity: The revised seasonally adjusted annual rates of productivity change in the first quarter were 8.3 percent in the business sector and 8.4 percent in the nonfarm business sector. In manufacturing, the revised productivity changes in the first quarter were 9.4 percent in manufacturing, 13.3 percent in durable goods manufacturing, and 4.6 percent in nondurable goods manufacturing. (Try and rationalize away those numbers).

High measured productivity growth is neither a sign of a healthy economy nor of prospective corporate profits. Rather it is a sign of extreme stress and potential economic collapse. Measured productivity primarily increases for one of three reasons :

1. Jobs are eliminated as workers sequentially finish their current production cycle functions to build inventory before the company closes its doors for good.

2. Jobs are eliminated as they become surplus due to high levels of capital investment.

3. Jobs are eliminated as financially weak competitors go out of business as competitive price reductions fail to adequately increase demand.

Only 2. represents a source of increased, or any, short and medium term profits, and it only works out over extended time. Rapid and large increases in measured productivity do not come from this source. It also represents a large financial stress on the companies to make the required investment to stay in business.

Regards, Don
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