Monday, December 29, 2008

Monthly Productivity

These days Q3 seems like ancient history, so I took a shot at forecasting Q4 productivity from the monthly data. In particular, I took personal income and deflated by the PCE-deflator and the BLS's monthly aggregate hours index. I formed a quarterly dataset:
  • BLS hourly productivity for the quarter -- released early in the next quarter

  • hourly real personal income (that is, personal income deflated as explained above) averaged for the first two months of the quarter -- available in the last month of the quarter

For the years 2000-8, I regressed log BLS productivity on its lag, a linear time trend, and the log of the personal income variable for the first two months. The last variable had a positive, economically significant, and statistically significant coefficient. That is -- if this relationship holds up -- today we can expect Q4 BLS productivity (not released yet) to be higher because hourly personal income is high for Oct and Nov.

Here is a graph of the two series since 2005. The graph is monthly, so the BLS productivity measure is centered on the middle month of the quarter. The last 3 personal income data points are September (part of Q3), Oct (Q4), and Nov (Q4).

Here's a version with transfers subtracted out of personal income.


Dust I Am said...

As you've likely figured out, I'm an economics dummy. This post generates a (stupid?) question on whether productivity refers only to manufacturing in the U.S. or also productivity in the health sector.

The article Hospital Meltdown shows significant economic problems among hospitals. My sister confirms "St. Francis Hospital in Topeka has already laid off some 60 workers and more cuts are to follow in the next several months."

Those cuts seem excessive and likely to influence both productivity and quality of productivity of services. Any comments?

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