The BLS's Productivity Index

This chart shows the change in productivity in nonfarm business from quarter to quarter. (Bureau of Labor Statistics)

By Caitlin Kenney

Productivity in the non-farm business sector grew by 9.5 percent last quarter, the largest gain since 2003. The productivity index is calculated by dividing output by the number of hours worked. Productivity has been on a steady climb this year, according to the Bureau of Labor Statistics, it rose 6.9 percent in the second quarter. While the increase may sound like good news, economist Howard Rosen, with the Peterson Institute, warns there's more to it:

"In the third quarter, productivity in the non-farm business sector grew by 9.5 percent. This was a result of an increase of output by 4 percent (no surprise here since it was already reported last week that GDP grew by 3 1/2 percent in the third quarter) and a decrease in hours worked by 5 percent. In other words, the strong increase in labor productivity is due to a slight recovery in output and a continued hemorrhage in the labor market, providing yet more evidence that the link between the macroeconomy and the labor market has been broken. The bottom line -- the economy is looking better on paper but not for workers."

When we talked to Rosen about furloughs earlier this year, he said that since the government doesn't keep data on furloughs, the real place to track them is in the productivity numbers.

"What we normally see during a recession, what we saw in the last recession is an increase, a very sharp increase in productivity because we were producing more with less people. Laying off workers and still producing the same amount so productivity went up."

Initial claims for jobless benefits fell last week by 20,000, but the overall number of claims remains extremely high. The economy has lost 7.2 million jobs since the recession began in December 2007, and an untracked number of workers have been furloughed.

categories: News

10:22 - November 5, 2009

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