Economically, productivity is falling. In the first few months of the year, it shrank to 7.5% – the sharpest drop since 1947.
To establish productivity, economists look at all the goods, all goods and services produced in an economy in a given quarter, and the number of hours it took them to produce.
According to Sarah House, a senior economist at Wells Fargo, higher productivity means workers are making more money and companies are making more money, “but, in the first quarter, production actually declined while working hours increased.” Went,” she said.
A few things may explain this, said Erica Groshen, senior economics advisor at Cornell University’s School of Industrial and Labor Relations.
“There’s been a lot of recruiting,” Groshen said. Too many vacancies, and new employees who aren’t doing as much work.
There is also a supply chain crisis. Input has been delayed. Employees spend a lot of time waiting idle. In addition, according to Aaron Sojourner, labor economist at the University of Minnesota, the omicron factor.
“You know, we saw millions of Americans missing out on work, either sick or had to take care of sick people in their families,” Sojourner said.
And losing productivity won’t help increase consumer prices. “Productivity is an escape for inflation,” House said. When productivity is high, businesses may be able to deal with higher costs without raising prices. Instead, she said, businesses are passing those costs along to us.
Good News? Labor productivity data is very volatile. So a bad quarter does not necessarily constitute a long-term trend.
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