US Worker Productivity Slumps At Worst Rate In 23 Years

Tyler Durden's picture

Despite a very modest beat of expectations US worker productivity fell for the 2nd quarter in a row (down 1.0% vs 1.3% QoQ), the two-quarter-average output per hour isdown 1.4% - the worst slump since 1993. Unit labor costs rose by a better than expected 4.1% (helped by a downwardly revised 2.7% rise in Q4), the highest since Q4 2014.

America’s productivity slump is the biggest in nearly a quarter century...

 

As Bloomberg notes, the confluence of falling productivity, higher labor costs and an economic slowdown are putting a dent in companies’ bottom lines, with earnings among S&P 500 Index members projected to slip for the fourth straight quarter.

As we detailed previously, there are numerous reasons for this plunge in worker-productivity, from perverted inventives not to work to unintended consequences of monetary policy enabling zombies, but perhaps the most critical driver is exposed in the following dismal chart...

51% of total time spent on the Internet is on mobile devices - in 2015, first time ever mobile is #1 - to make a total of 5.6 hours per day snapchatting, face-booking, and selfying...

Source: @kpcb

So, while every effort can be made by Ivory Tower academics to solve the problem of American worker productivity, perhaps it can be summed up simply as "Put The Smart-Phone Down!"

As we detailed previously, adjusting for the WWII anomaly (which tells us that GDP is not a good measure of a country’s prosperity) US productivity growth peaked in 1972 – incidentally the year after Nixon took the US off gold.

The productivity decline witnessed ever since is unprecedented. Despite the short lived boom of the 1990s US productivity growth only average 1.2 per cent from 1975 up to today. If we isolate the last 15 years US productivity growth is on par with what an agrarian slave economy was able to achieve 200 years ago.

In addition, the last 15 years also saw an outsized contribution to GDP from finance. If we look at the US GDP by contribution from value added by industry we clearly see how finance stands out in what would otherwise have been an impressively diversified economy.

With hindsight we know that finance did more harm than good so we can conservatively deduct finance from the GDP calculations and by doing so we essentially end up with no growth per capita at all over a timespan of more than 15 years! US real GDP per capita less contribution from finance increased by an annual average of 0.3 per cent from 2000 to 2015. From 2008 the annual average has been negative 0.5 per cent!

In other words, we have seen a progressive (pun intended) weakening of the US economy from the 1970s and the reason is simple enough when we know that monetary policy broken down to its most basic is a transaction of nothing (fiat money) for something (real production of goods and services). Modern monetary policy thereby violates the most sacred principle in a market based economy; namely that production creates its own demand. Only through previous production, either your own or borrowed, can one express true purchasing power on the market place.

The central bank does not need to worry about such trivial things. They can manufacture the medium of exchange at zero cost and express purchasing power on the same level as the producer. However, consumption of real goods and services paid for with zero cost money must by definition be pure capital consumption.

Do this on a grand scale, over a long period of time, even a capital rich economy as the US will eventually be depleted. Capital per worker falls relative to competitors abroad, cost goes up and competitiveness falls (think rust-belt). Productive structures cannot be properly funded and the economy must regress to align funding with its level of specialization.

In its final stage, investment give way for speculation, and suddenly finance is the most important industry, pulling the best and brightest away from every corner of the globe, just to find more ingenious ways to maximise capital consumption.

As the slave economy got perverted by incentives not to work, so does the speculative fiat based economy, which consequently create debt serfs on a grand scale.

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PirateOfBaltimore's picture

My productivity is down because bizarro world is a depressing place to live.

Clint Liquor's picture

It's difficult to be productive when you are being 'spit roasted' (porn term) by the Government on one end and the Bankers on the other.

divingengineer's picture

They pretend to pay us, so we pretend to work. 

More Ammo's picture

I do take a raise every chance I get and go read ZH on the company dime...

Restorative_Ally's picture

Lots of people browsing ZeroHedge instead of working.

chunga's picture

Finance is the moast important industry Tyler. The problem is it's pure solid fraud.

Ghordius's picture

Finance is the most important "industry"... in select countries. sometimes called "FIRE economies"

divingengineer's picture

As in: You'll get burned if you try to play. 

chunga's picture

Goods, services, anything real has become merely notational. It's all about financing and insiders getting fat playing "flip that stock".

sgorem's picture

long Verizon......the selfish selfie syndrone...............

spanish inquisition's picture

All those retail bankruptcies should help clear out the dead weight of companies on life support who are at minimum employment too keep the doors open. Automating trucks and fast food kiosks should help. This should free up the unemployed to do more shopping. /s

divingengineer's picture

Now they can follow their "passion". 

Emergency Ward's picture

The Art of Consumerism.  Highbrow stuff.

Last of the Middle Class's picture

another bullshit graph with metrics you can't verify. D&C at work.

 

bamawatson's picture

charts n graphs are excellent tools for predicting the past

hooligan2009's picture

hahaha...excellent, i take it you are a momentum trader!

you gotta see that NIRP/ZIRP have reversed the logic for making money so that markets now DO have a memory, there is no time value of money and risk no longer expects a return thouugh?

MrBoompi's picture

I wonder how this rate is derived?  If workers are producing 100% of orders placed, on time or close to it, and the rate drops, it means orders have slacked off, not that the workers are lazy.  It seems to me when this measure drops there will not be much hiring going on, but that's about it.

divingengineer's picture

If productivity per worker drops, won't they have to hire more workers to get the same amount of work done?

POW!!

There goes the unemployment problem!

We just been too productive for our own good theese last 40years.

Not like it had a back end to it or anything. They never shared any of the profit increases, so fuck em'. 

 

Ghordius's picture

I hardly believe that US worker productivity is down because of

"51% of total time spent on the Internet is on mobile devices - in 2015, first time ever mobile is #1 - to make a total of 5.6 hours per day snapchatting, face-booking, and selfying..."

because I hardly believe that the US workers that are employed in those specific industries where you can measure productivity are glued at their small screens while working

in the same way, the other countries against which US worker productivity is measured... live in the same monetary madness then the US

specifically, some of them have their monetary madness... as a result or even out of protest against US monetary madness. hence "currency wars"

note, in this, that it's about countries in the "dollarzone", i.e. countries which sell their products in dollars, which makes all their cost calculation relevant in dollars only

so all in all I don't think this article is really leading anywhere. the most important fact is neglected: US workers compete... in USD. as many workers in Asia

many good points, but also many apples vs oranges

Shizzmoney's picture

All of these countries in bubble territory: AUS, UK, US, JPN, EU.....they all are having this same issue.

Smartphones/social media has very little to do with it.  It's just that printing up all this funny money by the CBs of the world has resulted in the dollars that we earn at "work" are worth less and less.  As a result, it becomes harder to catch up for an equilibrium that is more desireable in terms of these numbers.  

One can make more money having connections inside the CB, and taking that money to buyback stock, buy properties to squat on while real estate bubble keeps rising, or having access to algos for a fake stock market.  All these CEOs at app startups (Uber) and big pharma companies (Vertrex, Valeant) making million dollar salaries despite losing money YOY contributing nothing to society are more of a weight on productivity that some over worked, indebted millennial who tweets too much while working.

Work doesn't earn shit, for the most of us.  Janet Yellen and Neo-Keyesianism has made the working man a sucker.

Additionally, austerity has really reamed the working classes.  In Japan, UK, and the US - the majority of jobs are temp.  They pay well hourly, but with no to little benefits, and no one is a saving (b/c in a NIRP/ZIRP environment, what the point?).  Productivity is a two way street; if workers and outcomes are rewarded by grinding blood out of rocks, then the problem isn't the blood: its the rocks.

Americans maybe on social media all the time, but they also work the most hours in the Western world.  By a ton. 

It's the "Federal Reserve Note", stupid.  That's the problem.

hooligan2009's picture

the combination of over regulation/QE (=do no work, pay no tax, just print) and smart phones each contribute to an incentive to do no "new" work or use your initiative to grow your business.

if you do not seek out work, you don't have to fill out forms and engage your comapnies tortuous working practices to prove that you have done the work correctly and won't get sued.

what do you do in the meanwhile? you "chat" on your cell phone, you search for clothes for you and yours, you seek out the best gambling odds, you look for cheap holidays.flights.restaurant deals.

none of the social media chats result in productivity gains

i recall at the height of the dot.com bubble in 1999/y2k people were talking about the switch to the "leisure economy" - now we have the internet of things, whatever the fuck that means.

perhaps AAPL will come up with a micro 3d printer for its i-phone 9, that makes food from granules of dirt then we can realy see a "do nothing, go nowhere, two bob, jack shit" economy.

youngman's picture

That increase in wages is the manditory minimum wage increase kicking in..a false flag....soon you will see those jobs go by by a they go out of business.....

silverer's picture

Most people will absolutely underestimate the importance of the statement that worker productivity is falling. It is HUGE. Because that means you must immediately cut present and future spending, because if you are continuing to increase it, without a productivity increase, the debt will NEVER be paid. So congress is a total fraud that they don't bring that in front of the people today, and make the necessary adjustments. Continued borrowing knowing this is going on is PURE THEFT from your children and any decent future for the country.

Grandad Grumps's picture

Ya know .. before you start drawing conclusions based on "data" ya might want to investigate the assumptions inherent in the data.

1. HOW IS PRODUCTIVITY MEASURED? There has to be both a numerator and demoninator. What are each dependent on?

From my direct experience, I can tell you that the business that I am in is experiencing the following things:

a) increase order volume
b) lower material costs
c) lower selling costs
d) more unit volume produced per employee (and per labor dollar)
e) less dollar volume produced per employee (and per labor dollar)

My best guess is that the whole increase in productivity scam over the previous 20 years was almost entirely based on 2 things:
1) inflation
2) labor arbitrage with China (Apple pays for labor in China and sells products for prices as if the labor came from the US, pocketing the difference in labor and counting the increase in sic "value" as an increase in profit and productivity... but it is not really an increase in productivity, just labor arbitrage!)

DaBard51's picture

Time filling out forms and taking "customer satisfaction" surveys decreases productivity, too

Grandad Grumps's picture

ISO9001, ISO14001, TS16949, EICC/GESI, Conflict Metals, OSHA, EPA, FAA, DOT ... and on and on and on.

Audits on top of audits.

More Ammo's picture

Don't forget all the "meeting$" about the audits...

the.ghost.of.22wmr's picture

Just redefine productivity like they keep redefining GDP.

The Real Tony's picture

I live in Canada and have the answer for that one. The word is immigration or third world tripe. What Canada takes in is "lowlife loafers". Canada went from one of the highest productivity rates in the world in the mid 1980's to one of the lowest in the world today. The change exactly coinciding with all the bucket sludge immigrants who emigrated to Canada.

More Ammo's picture

I know this is not Politically Correct but "white fight" does not just apply to housing...  Once "Afirmative Action" takes hold the quality people walk away....

CuttingEdge's picture

How productive are workers at McDonalds and Dunkin?

Maybe the massive increase in that successful industry's labour participation (burger flipping) as manufacturing plummeted is skewing the numbers somewhat...

hooligan2009's picture

mickey d's just increased productivity by adding "garlic fries" to its menu - no doubt the workers are more productive than the garlic breathing eaters as they engage in other service oriented businesses like getting being a dentist, a barber or in transit in small elevators

Weisbrot's picture

good thing folks can read this on their smart phones @work.

venturen's picture

hard to work when you are doing diversity training 10 hours a month 

hooligan2009's picture

is that "how to hug a transgender person without "outing" them" diversity training or how to work a lot harder to include a sub-standard quota of any one of the multitude of minroities - other than white males, who are actually a minority but do the wrong thing by lifting the lowest common denominator rather than reducing it by including  minority quota employment proticols?

Falling Down's picture

Overtime at the contract manufacturer I work for was slashed just this week. 

I see rough times ahead, right now feels eerily similar to '08.

roadhazard's picture

Lots of people having to do the work of two. Fuck yo productivity.

mary mary's picture

They pretend to pay us.  We pretend to work.

Why should we work, when they just print $17-TRILLION of funny-money to devalue our paychecks, PLUS pay us 0% interest on any money we save.