Productivity is Still Growing

It looks like employment will be one percent lower in 2008Q4 than it was in 2008Q3. There is not much uncertainty about this, because October and November employment are already known.

Work hours per employee will also be lower -- maybe also about one percent. Thus, total work hours will be 1-2 percent lower, probably closer to 2 percent.

Productivity growth is the percentage change in GDP minus the percentage change in total work hours. I have seen forecasts that GDP 2008Q4 will be 1.25 percent lower than for 2008Q3. Thus, the forecasts imply further productivity GROWTH. Productivity also grew 2007Q4 through 2008Q3 (about 1.9 percent). The fact that we are having a recession while productivity is growing tells us a LOT about why we have a recession, and why it is so different from the 1981-82 recession or the Great Depression. More on this over the next week....

For those 136 million who still have jobs, productivity growth is VERY good news because productivity determines how much you ultimately get paid.