CT Blue

Yesterday I read a post by Dean Baker titled Productivity Tanks in the First Quarter. It’s behind a paywall so clicking on the link might not do you much good, though I do recommend becoming a Patreon subscriber of his, as he actually knows what he’s talking about. Anyway, the post begins as follows:

The Bureau of Labor Statistics today released its first estimate of productivity in the first quarter. It showed productivity falling at a 0.8 percent annual rate. This is really bad news.

Productivity matters a lot for both inflation and living standards. In the five years from 2019 to 2024, productivity growth averaged 1.9 percent annually. That is up from 1.1 percent annually in the decade before the pandemic.

The faster rate of productivity growth most immediately translates into lower inflation. As a first approximation, inflation will be equal to nominal wage growth minus productivity growth. If nominal wages are growing at a 4.0 percent annual rate, and productivity is rising at a 1.9 percent annual rate, inflation will be roughly 2.1 percent. (We could have some redistribution from profits to wages, reversing the rise in profit shares in the pandemic, but we’ll leave that one for another time.)

I think it’s fair to say that we’ll be seeing more bad statistics in the near future, but I’m also fairly sure that the statistics released by the federal government after the near future will have the economy looking great. Isn’t it obvious that those bad statistics are the results of incompetent DEI hires and that the proper thing to do is to make up good statistics and release them instead? After all, it seems only right to consign those pesky little “facts” to the memory hole and replace them with alternative facts that are much more to our liking.