Friday, May 5, 2017

Ongoing Productivity Decline

Some days won't end ever
And some days pass on by
I'll be working here forever
At least until I die
--Huey Lewis & The News

A few months back we discussed downtrends in domestic productivity. We noted that, over the past few years, US productivity had been declining in a manner not seen in the last 70 years.

Fast foward a couple quarters and the trend hasn't changed. This week, non-farm business output/hr printed a -0.6% change in Q1 2017 compared to the same period a year ago.

Opinions vary widely as to why the productivity slowdown is occurring. From where I sit, the most straightforward explanation is that declining worldwide saving has reduced the pool of capital available for productivity improvement projects.

In fact, there is a case to be made that negative savings rates (debt) have left us in a state of capital consumption that cooks the goose that lays the golden eggs essential for future productivity gains.

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