Finally read Greenspan's speech a few days ago. Awesome stuff.
interactive.wsj.com
After a bit of a technical discussion of the discrepancies in government statistics, he goes for the money shot:
"I've always been of the opinion that if you really want to know what's happening with productivity, you have to do it from the income side because the data on profits are good, the data on prices are reasonably good, and all the unit costs are a better measure to get the fallout; in other words, to get -- if you have unit labor costs and some varying judgments of what's going on in compensation per hour, obviously productivity comes out as a residual.
And it is a far more consistent story about what's going in the world to reconcile the fact that despite increasing compensation per hour, accelerated compensation per hour, prices have done nothing. The only way in the full accounting system that that can happen is that productivity is rising -- I should say productivity growth has accelerated in recent years, and indeed, all the collateral evidence does suggest that that is indeed the case.
And even though we don't have data for non-financial corporations for the third quarter, preliminary stuff that we put together for the manufacturing part of that shows that the third-quarter productivity numbers are still moving at a fairly good pace.
So what we have is a very unusual phenomenon in which we are seeing price increases, or I should say pricing power on the part of American business virtually non-existent in the context of a fairly substantial set of pressures where you would have expected long ago prices to have accelerated. I don't recall moving this far into a business cycle expansion with the price level, inflation rate, staying down, and by some measures even continuing to fall. I do not remember this type of inflation pattern existing for this long into a business cycle pattern." |
