Just under two years ago, when Bank of America's economic team still produced meaningful commentary instead of blaming the growth slowdown on the snow [6](especially after it said not to blame the growth slowdown on the snow [7]), it pointed out [8]that the real reason the US recovery was aging (this was in the summer of 2013) was the tumble in worked productivity. This is what BofA said then: "what we show below is that, outside of the tech boom in the late 1990s, productivity tends to slow as business expansions mature. Our current 'expansion' is now thoroughly mature."
[9]
This time, Bank of America was absolutely right.
Of note, its commentary took place just as the Fed had launched QE3 in another desperate bid to if not boost the economy, then at least sends stocks to all time highs. It achieved the latter, as for the former, after peaking at 1.2%in Q3 2014, productivity has since crashed.
As the chart below shows, according to just released final data by the BLS, in Q1 labor productivity barely rose, growing 0.3% in Q1, following a -0.1% drop in the fourth quarter. Worse, on a sequential basis, productivity dipped by a -0.8% in Q1 (a 3.1% SAAR), after a -0.5% drop (-1.9% SAAR) in Q4.
[10]
This is the first sequential drop in nonfarm productivity in 22 years, or since 1993!
[11]
That, in a nutshell, is also the real reason the US economy refuses to grow no matter how many billions in liquidity the Fed stuffs into it.
As for the alleged 6.7% offsetting surge in unit labor costs, it may be going somewhere, but as we showed a month ago [12] when showing the recent collapse in non-supervisory compensation, it sure isn't wages for 83% of the US population.
