Wednesday, April 29, 2009

Q1 Productivity

BLS will release productivity next Thursday, but the BEA release today suggests no productivity surprises: productivity similar in 2009 Q1 to what it was in 2008 Q3 and 2008 Q4. That's not especially good news, because productivity might be expected to rise when labor falls so much. But may it is good news in that, even it its worse quarters, this recession not yet shown total factor productivity declines as severe as the 1981-2 recession.

Below is a chart (I made this for my World Bank presentation two weeks ago) decomposing the labor changes in this recession into supply changes and distortion changes. I post in now because it fits very closely with the BEA's release this morning. The MRS series says that labor supply stopped shifting out (consumption declines have stopped), which means that "distortions" (green series) had less of a role in reducing labor than they did in previous quarters.

[Technical note: "MRS" is the consumption-leisure ratio, and distortion is the gap between output per hour and MRS]

No comments: