“Nonfarm business sector labor productivity increased at a 6.6 percent annual rate during the second quarter of 2009, the U.S. Bureau of Labor Statistics reported today. This was the largest productivity increase since the third quarter of 2003, and reflects declines of 1.5 percent in output and 7.6 percent in hours worked.”
That means we worked a lot less but only made a little less. We pulled the slack out of the economy. This doesn't bode well for adding jobs to the economy. The only question is, what will the new normal be???
If previous demand was artificially high because of artificially high wealth (incomes were certainly not up) due to an artificially inflated stock market (tech bubble) and housing market (housing bubble) and easy credit (low interest rates and expanding credit card debt), then consumption was 'artificially' inflated and the labor market was also 'artificially' inflated. The new normal could be high unless consumption rises (economically unlikely), or government spending remains elevated (politically unlikely).
Now, I'm a self-described progressive democrat, small d, which basically means I'm a socialist. I don't know if I buy the new normal. I'm no fool, I realize full employment is nearly impossible, but that's not what we're talking about. We're talking about agreeing to a new normal that could be between 6% and 9% (that's U-3, let alone U-6). That's simply unacceptable.
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