2nd Quarter 2003
Labor Productivity, 2nd Quarter 2003:
Annualized Growth Rate for Labor Productivity, 2nd Quarter 2003 (Relative to 2nd Quarter 2002):
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The following perspective is excerpted from a speech by Federal Reserve Governor Ben S. Bernanke before the Bloomberg Panel For The Outlook on The U.S. Economy in New York City on September 4, 2003. In it he discusses some of the factors that have helped foster the "jobless recovery" that we find our economy in:
"For assessing the inflation forecast for the longer run, in this case the year 2004, one has to turn to the underlying economics. I do not disagree with the general tenor of the private-sector forecasts and the FOMC projections. It seems plausible that the combination of a strengthening recovery, well-anchored inflation expectations, and a monetary authority strongly committed to stabilizing inflation will serve to keep inflation in the projected range. However, in my view, the most likely outcomes are in the lower part of that range, and I believe that the risks remain to the downside. The reason is that ongoing productivity growth, together with stepped-up capital investment, may enable producers to meet expanding demand without substantially increased hiring in the near term, with the result that labor markets remain soft. Indeed, as I have noted, several of the private-sector forecasters project unemployment rates still near 6 percent in the fourth quarter of 2004, despite real growth approaching 4 percent for the second half of 2003 and all of 2004."
The following perspective is excerpted from a press release of the Bureau Of Labor Statistics detailing manufacturing productivity and employment. It describes how productivity increases are a reflection of greater output with less hours worked. It was released on September 4, 2003:
"In the second quarter of 2003, productivity increased 3.7 percent in manufacturing, as output declined 2.4 percent and hours of all persons fell 5.9 percent (seasonally adjusted annual rates). In the durable goods sector, productivity grew 3.5 percent in the second quarter of 2003, as output fell 3.3 percent and hours dropped by 6.5 percent. In nondurable goods, output per hour rose 3.4 percent, as output decreased 1.7 percent and hours dropped 4.9 percent. The hourly compensation of all manufacturing workers increased 5.2 percent during the second quarter of 2003, reflecting a 4.9-percent rise in hourly compensation in durable goods industries and a 5.9-percent increase in the nondurable goods sector. Real hourly compensation in the total manufacturing sector advanced 4.6 percent in the second quarter, after increasing 2.4 percent one quarter earlier. Unit labor costs in manufacturing rose 1.5 percent in the second quarter of 2003, compared with a 2.2 percent increase in the first quarter. Unit labor costs rose 1.4 percent in durable goods and 2.4 percent in nondurable goods in the second quarter of 2003."
The following is excerpted from the February 21, 2003 edition of the Economic Letter, a publication of the Federal Reserve Bank of San Francisco. It is from an article called "Where To Find The Productivity Gains From Innovation?" by FRBSF economist Daniel Wilson. In it he examines productivity gains and their relation to innovations in information technology:
"The surge in U.S. productivity growth that began in the mid-1990s has generated considerable debate among economists. While most agree that the boom in information technology (IT) investment greatly contributed to this surge, many argue whether this contribution is mostly due to productivity gains in the manufacture of IT goods or whether the productivity gains "flowed downstream" from the IT manufacturers to the users of IT goods in other industries. If productivity gains do flow downstream to users, then it is more likely that aggregate productivity growth will persist for many years, even if the pace of innovation were to stall, as downstream industries continue to discover productive uses of the new technologies. While the focus on the impact of IT innovations in recent years is understandable, innovations in equipment affecting users' productivity have been much broader. A key source of the innovation in business equipment has been industrial research and development (R&D). Thus, knowing the relative amounts of R&D spent to develop various types of business equipment gives a sense of the degree of "innovativeness" embodied in each type of equipment and allows us to move beyond a dichotomous world where only IT equipment is considered innovative. This Economic Letter reports the results of a study (Wilson 2002) that looks at industrial R&D spending on all types of business equipment and develops an index to measure how much R&D spending is embodied in a downstream industry's equipment. The results show that the extent of R&D embodied in the equipment used by a down-stream industry is an important contributor to that industry's productivity growth. This finding provides strong evidence that much of the benefit of innovation does flow downstream from the innovating firms making equipment to the firms and industries that use the equipment embodying those innovations."
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