This morning the Dept. of Labor released its productivity numbers. Productivity was up 9.5% after it was up 6.6% last quarter. Output per hour was up 4.3% while output was down but hours worked was down even more and a shift has happened from labor-intensive processes to capital-intensive processes as evidenced by falling unit labor costs and quickly rising unit non-labor costs. The market took it well and rallied on the productivity number. Apparently the economy can keep (or get back to) humming even with high unemployment. But firms only want to produce if there is demand for goods.
- why keep producing more if unemployment is high and demand is lacking?
- In this environment, where can we see demand coming from?
- Is the low dollar enough to make US exports so competitive that they can support aggregate demand in the US to push production high enough until increased productivity can't take care of demand anymore and you need to hire people back (who will then create demand themselves)?
- Is the market correct in viewing the higher productivity as positive?
A more detailed understanding of the literature on the real business cycle coudl certianly be useful.
- why keep producing more if unemployment is high and demand is lacking?
- In this environment, where can we see demand coming from?
- Is the low dollar enough to make US exports so competitive that they can support aggregate demand in the US to push production high enough until increased productivity can't take care of demand anymore and you need to hire people back (who will then create demand themselves)?
- Is the market correct in viewing the higher productivity as positive?
A more detailed understanding of the literature on the real business cycle coudl certianly be useful.
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