4Q2018 Final: Headline Productivity Improved But Roughly The Same As Unit Labor Cost Growth

But as new manufacturing re-appears, the labor growth is likely equal to product output (as the old labor intensive technologies were exported and what was left was productivity efficient).

Caveats Relating to Productivity

Productivity is determined using monetary criteria, and does not recognize outsourced man hours - in other words, if a business cuts half of its workforce by outsourcing a sub-component or sub-service, this would be a 50% productivity improvement.

These productivity measures describe the relationship between real output and the labor time involved in its production. They show the changes from period to period in the amount of goods and services produced per hour. Although these measures relate output to hours at work of all persons engaged in a sector, they do not measure the specific contribution of labor, capital, or any other factor of production. Rather, they reflect the joint effects of many influences, including changes in technology; capital investment; level of output; utilization of capacity, energy, and materials; the organization of production; managerial skill; and the characteristics and effort of the work force.

Econintersect believes a better measure (if you must use monetary tools to tract productivity) would be competitiveness.

Looking at productivity / output long term - output fall below 0% year-over-year change is a good sign that a recession is underway. Another way to look at it - if productivity rate of gain is falling, this could be an indicator a recession is coming.

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