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Dismal Scientists Can’t Make Heads, Tails Of Dismal Productivity Numbers

This one is a head-scratcher.
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Looks like he's working, but he's not.

From a productivity point of view, Jimmy Carter might still be president and you might be waiting in line for gas in a car that gets 15 miles per gallon. This is perplexing, because while things may not be great, they aren’t 1979 bad. Goldman’s chief economist has a thought: Maybe productivity is a useless, bullshit measure in our fast-paced, Twittering world.

“Is the weakness for real? We find the notion of a major productivity slowdown difficult to square with several aspects of the economic and financial environment of the past decade,” they wrote. “The productivity slowdown of the 1970s featured declining profit margins, rising inflation, and declining equity valuations.

“In the past decade, by contrast, profit margins have hit all-time highs, inflation has remained very low, and equity valuations have surged. And to cap it all, tech stocks have outperformed the overall market and are trading at their highest relative levels ever, except for the late-1990s technology bubble.”

But wait! Jamie Dimon’s chief economist has an objection! And a good point!

“The beginnings of many of the most prominent more recent technologies stretch back well before the financial crisis. Cellphones, home computers, email, and the World Wide Web gained ground rapidly in the late 1990s and were already widespread in the early 2000s,” they write.

Perhaps this means productivity has been undermeasured for the past 30 years, they suggest. But if that’s the case, they ask, why has productivity slumped dramatically in just the past several years?

Got any thoughts? Clearly, Wall Street’s brightest economic minds could use some help here.

Goldman Sachs and J.P. Morgan Can’t Agree Why the Economy’s Productivity Has Slumped [WSJ Real Time Economics blog]


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