Opinion | Increased productivity is not reported

Opinion |  Increased productivity is not reported

Americans have no shortage of economic data. Some of the data — 14 million new jobs — is familiar by now.

Unemployment stands at 3.9 percent. Manufacturing jobs increased by about 800,000 under President Biden. The clean energy boom is well underway. (A nonpartisan clean energy business group estimates that 403,000 jobs will be created by 210 major energy projects announced since the inflation-reducing law took effect in mid-2022, the Associated Press recently reported.) Investments have been announced, and the largest job gains are expected to be in the electric vehicle, battery storage and solar sectors.

On the inflation front, we did not reach the 2% target, but inflation fell to 3.7%. Biden can boast that core inflation is at its lowest level in two years, and we have one of the lowest inflation rates of any major economy in the world.

Results We are Awesome.

The Wall Street Journal seemed to apologize for its pessimistic forecast. The newspaper said: “It is easy to mock others’ previous predictions, but given the obstacles the economy had to clear, it is truly surprising that the economy has performed so well.” The report added: “Add to this, inflation has slowed despite the addition of 2.4 million jobs so far this year, and GDP is expanding much faster than economists expected.” The economy has even overcome “the regional banking crisis, the sharp increase in short- and long-term borrowing costs, and the resumption of student debt payments.”

Less discussed is why this happens.

One data point emerged last week that may explain this how We are simultaneously achieving strong growth and reducing unemployment and inflation. “Labor productivity in the nonfarm business sector increased by 4.7% in the third quarter of 2023, the U.S. Bureau of Labor Statistics reported today…as production increased by 5.9% and hours worked increased by 1.1%,” the Labor Department reported. Furthermore, the report found that “the increase in labor productivity is the highest rate since the third quarter of 2020, in which productivity increased by 5.7 percent.” Compared to the same quarter last year, labor productivity in the non-farm business sector increased by 2.2% in the third quarter of 2023.

Bottom line: We don’t see wage inflation, which is… a lot Experts And he expected. Instead, the report found that “unit labor costs in the nonfarm business sector declined 0.8% in the third quarter of 2023, reflecting a 3.9% increase in hourly compensation and a 4.7% increase in productivity.” This continues a pattern that some picked up over the summer.

As Carl W. Smith noted in Bloomberg: “Rising labor productivity means that the economy is able to create more things with the same number of workers, and work the same number of hours. This is critical because bringing inflation back under control requires either businesses to increase the supply of goods and services or Or consumers reduced their demand. In this case, businesses increased supply, allowing consumers to buy more. This boosted the consumer spending figure, which is critical to the performance of the U.S. economy.

It is too early to know whether this trend will continue or is directly related to Biden’s economic agenda. Productivity waxes and wanes, and is associated with peaks and stagnation in growth. However, if productivity and growth gains (which rose in the third quarter) persist over an extended period without a rise in inflation, Biden should take some credit.

After all, Biden’s plan was to increase growth and have the share of wealth go to the middle and working classes. By investing in infrastructure, green energy and other projects, he hoped to boost productivity and allow wages to rise without inflation.

In its first year, the Inflation Reduction Act prompted the private sector to invest more than $110 billion in green energy. The federal government also incentivized American companies to invest in general. “By June, real construction of manufacturing facilities had doubled since 2021, primarily reflecting the presence of new factories in the technology sector,” a recent Treasury report concluded. It is not surprising, then, that the economic recovery in the United States is stronger and faster than in other countries.

National Economic Council Director Lael Brainard last month described “the historic trilogy of the bipartisan Infrastructure Act, the Chips and Science Act and the clean energy portions of the Inflation Reduction Act (that) strengthen the supply side of our economy by stimulating the private sector.” Investments in infrastructure, clean energy and semiconductor manufacturing. She explained that by combining enhanced worker training with government and private sector investments, the administration hopes to keep manufacturing thriving and growth in other sectors. She added that we achieved “particularly large employment gains during this recovery in sectors such as professional and business services, transportation and warehousing, and manufacturing and construction also saw employment gains.”

The Chairman of the Federal Reserve has taken this into account. “The recent rise in US productivity has highlighted Federal Reserve Chair Jerome Powell’s emerging narrative of how inflation will continue to fall even as economic and job growth continues,” Reuters reported. The report continued: “The best-of-both-worlds outcome will depend on the United States finding a new balance between demand for and supply of goods and services less by ‘destroying’ demand — which is how Fed interest rate increases typically do” — and more through improvements in capacity Economy.

The “green economy” has bet on the ability of American workers to increase their productivity, given proper training and supported by strategic investment. With an influx of public and private investment, it appears that the dream scenario – higher output, higher wages, and lower inflation – may be achievable. If so, Biden’s economic policies may finally be getting their due.

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