[The Last Refuge] U.S. nonfarm productivity is a measure of economic activity within the engine of the U.S. economy. The U.S. productivity rate is a measure of how much value is produced by the economy through demand for the products and services, and the labor associated with the creation of those products and services.Anecdotally, it has looked for quite some time that around May of this year the economy peaked, plateaued for a few weeks, and then began a slow downward progression. Today the Bureau of Labor statistics puts some revised data to that third quarter (July, August and Sept) economic activity {data here}. The quantified results align with what we sensed was taking place.
The value of all products and services generated increased by 1.8 percent. However, the labor cost of generating that small amount of added value increased by 7.4 percent. The difference between those two numbers is a drop in productivity of 5.2% over the entire quarter.
This is the largest quarterly drop in productivity since 1960 !
The Biden administration will blame the drop in productivity on a lack of material to produce the end product (ie. the COVID excuse). Which means employed people were sitting around waiting for goods to arrive and being less productive. There is a small amount of that which might be true. However, it is not the biggest factor, at least not on this scale. Keep in mind we are talking about both goods and services.
The more likely cause of such a massive decline in productivity is a genuine decline in demand. In the aggregate, consumers needed less goods and services. This likelihood aligns with the diminished and softened retail sales figures recently noted. It is a simple cause and effect. When gasoline, energy, and essential products like food cost more, consumers have less money for other stuff. Demand for the non-essential products drop.