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Strategies & Market Trends : ahhaha's ahs -- Ignore unavailable to you. Want to Upgrade?

To: ahhaha who wrote (5680)	12/4/2002 10:30:06 AM
From: Ahda	Respond to of 24758

Productivity grows at brisk 5.1 percent rate in third quarter Wednesday December 4, 8:41 am ET By Jeannine Aversa, Associated Press Writer WASHINGTON (AP) -- Productivity, a crucial ingredient to the economy's long-term vitality, grew at a sizzling annual rate of 5.1 percent in the summer, a faster pace than the government previously thought. The growth rates for both compensation figures in the third quarter marked the biggest increases since the third quarter of 2000, suggesting that workers who have jobs are making gains. The rise in third-quarter productivity helped to push down unit labor costs, good news for companies trying to control costs to boost profits. Unit labor costs fell at an annual rate of 0.2 percent in the third quarter, an improvement from the 2.2 percent growth rate in the second quarter. For the 12 months ending September, productivity grew at a brisk 5.6 percent pace, representing the strongest showing since the first quarter of 1973.

To: ahhaha who wrote (5680)	12/4/2002 1:05:00 PM
From: ahhaha	Read Replies (2) \| Respond to of 24758

Pertinent items from Reuter's productivity report: The data did show that despite the soft labor market, companies are raising pay for existing workers. Hourly compensation jumped 3 percent on an inflation-adjusted basis in the third quarter, the biggest rise in two years. However, unit labor costs eased 0.2 percent. This last paragraph seems to contradict itself, but the problem isn't in the assertion, but in the way that productivity is measured. Business sector output is an annual-weighted index constructed after excluding from gross domestic product (GDP) GDP is a dollar represented quantity, not a unit count. It is assumed that dollar quantity and unit count are 1 to 1, but that's all the problem. They aren't. I've brought up this ambiguity in the past on this thread. Annual indexes for manufacturing and its durable and nondurable goods components are constructed by deflating current-dollar industry value of production data from the U.S. Bureau of the Census with deflators from the BEA. The price deflator runs about 2% lower than Cleveland Fed's CPI. This ambiguity is similar to the Jap/US PPP commented by Ed Bugos in the article I recently posted on this thread. So what we have going on here is a dollar evaluation of output inadequately adjusted for inflation. Unit output is therefore about 2% lower than nominal output which is the numerator in the productivity formula. These deflators are based on data from the BLS producer price program and other sources. Here is where economic political bent enters. The BLS is dominated by socialist demand management neo Keynesian economists. Their formulas are composed to show what they need to believe more than what is actually occurring. What you will see is a productivity collapse if producer prices rise as they seem to be doing now, but true productivity will not have dropped as much as their formulas claim. The industry shipments are aggregated using annual weights, and intrasector transactions are removed. Quarterly manufacturing output measures are based on the index of industrial production prepared monthly by the Board of Governors of the Federal Reserve System adjusted to be consistent with annual indexes of manufacturing sector output prepared by BLS. Aggregation by annual weighting is another questionable technique. It tends to adjust more recent data to data of a year ago. The Fed's index of industrial output is another specious measure. It takes disparate categories and makes an evaluation based on an index component already embedded in the BLS assessment. Nowhere in this evaluation will you find raw units of output counted. The result is the measure of productivity is dimensionless, i.e., dollars divided by dollars, dollar value of output divided by dollar value of labor used to create the output, when productivity should be dimensionful, i.e., units of output per dollar of labor cost input. When you do that you find productivity remains remarkably constant at 2 +- .5% per year. I claim that productivity change is flat and that "raising pay" causes the structural inflation that Cleveland Fed measures in CPI. Pay raise rate = 5%. Productivity = 2%. So structural inflation is running at 5 - 2 = 3%. The BLS would say 5 - 5 = 0% inflation. You'll find my calculation is the only one that is consistent with all the data over the decades. It took me almost 10 years to figure this out because I had to go beyond the textbooks and other academic bilge in order to make sense out of it. Economic thinking before 1950 followed a classic line which I eventually discovered was identical to what I assert is the only consistent way. In the '60s the academics got on the "we can get something for nothing by macroeconmic tinkering" intellectual boondoggle and that exists to this day. Relative productivity is fixed at 2% because no generation works harder than any other, and it is technology which adds the nominal growth. However, absolute productivity never changes at 0% per year. Civilization changes its appearance but the US is not greater than Egypt, Rome, or Greece, and gold's purchasing power continues to decline as it has for thousands of years.