Re-run: Unemployment up, productivity up

Written By: - Date published: 2:42 pm, March 16th, 2011 - 8 comments
Categories: economy, unemployment - Tags:

As I predicted in this post last year, productivity has risen sharply in the latest stats but for all the wrong reasons.The Herald gushes “NZ employers squeeze more out of fewer workers” but that’s fundamentally wrong. We’re getting less out of even fewer workers. “Labour input” fell 4.3%, while GDP fell 0.8%. Why anyone would think this is a Good Thing is beyond me.

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Unemployment up, productivity up

Like here in New Zealand, unemployment continues to climb in America. And one of the results is soaring productivity.
us productivity and unemployment(sources: 1,2)
But wait, isn’t higher productivity good?

In normal circumstances, yes, when it comes about from capital deepening (ie businesses investing in equipment rather than taking profits) or a more educated workforce. But productivity will also raise when unemployment goes up, because unemployment is rising.

The least productive jobs usually disappear first when businesses close and cut back. Overall output falls but the amount of work done falls even more, so productivity (output divided by hours of work) climbs. That’s not a good thing – everyone is worse off.

That will be worth remembering when New Zealand’s productivity stats come out in March, and they show a big leap in productivity. It would be embarassing for anyone to foolishly claim that increase is somehow a result of Key sitting around and smiling for the cameras, when it’s really a result of tens of thousands of Kiwis losing their jobs.

8 comments on “Re-run: Unemployment up, productivity up”

  1. lprent 1

    It would be embarassing for anyone to foolishly claim that increase is somehow a result of Key sitting around and smiling for the cameras…

    We should start a pool on which political ‘analysts’ do exactly that. But I don’t gamble and my list of the usual gormless suspects who seem to just swallow press releases whole sprang immediately to mind…. No fun betting on sure things anyway.

    What about which ones will look closely at the unemployment stats to explain the productivity ‘increases’?

    • Pascal's bookie 1.1

      Nick Smith would be my bet. Maybe Rob Hosking.

    • Herodotus 1.2

      Keys mannerism inspire NZ to out perform, so any analysis would be correct in their conclusions. marty I wonder how much the increases are due to commodity prices for the likes of dairy, petrochemicals, fishing. If it is, then the next quarter will be a huge windfall as our currency adjustements take effect. I persume that productivity is GDP?

  2. ZeeBop 2

    So business cutback on investment, stop training and let go workers, and the idiot press run a story saying all’s good productivity up! Its a bit like a car hurtling down a steep slope not running on off the engine and declaring that we should not apply the breaks because we running so fuel efficiently! We need more cars running out of control! Loss of investment will tell in lower profits in the future, less training will toll in less skilled staff, and let go workers will mean more costs getting them back to work. Its a shame nobody in the media gets fired, because their productivity is like a car hurtling down hill with no breaks, they just never let up with a good spin to keep the old dangerous momentum running better than ever.
    What happened to the News? Well they under invested, stop training because they let go reporters who had skills and replaced them with automatons of right wing news speak,
    and now you know why we get productivity up, all’s well with the economy.

  3. Afewknowthetruth 3

    The whole concept of productivity as measured by economists is utter bullshit, since it totally ignores the contribution of the biggest source of production of the whole lot -nature.

    All most people ever do is consume things that nature produces or convert them into waste.

  4. Rob 4

    marty, looks like the Herald this morning has done a better job, starting an article with “Labour productivity has jumped, according to official figures out yesterday, but for all the wrong reasons.”

    much preferable to the CTU response as reported on radio: “The Council of Trade Unions says that if productivity’s up 3.7%, then pay settlements of 2-3% aren’t out of order.”

  5. Rob 5

    P.S. It was Stuff that had the “squeeze more our of fewer workers” headline. I’ve just read the article – it is a shocker.

  6. tsmithfield 6

    Marty: “Labour input” fell 4.3%, while GDP fell 0.8%. Why anyone would think this is a Good Thing is beyond me.”

    Perhaps your admitted lack of comprehension is due to failing to grasp the difference between profit and turnover.

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