Tags: Atkinson | productivity | economy | wage

Analyst Atkinson: Weak Productivity a 'Major Problem' for Economy

By    |   Tuesday, 17 February 2015 01:44 PM

Many analysts are excited about the economy based on recent GDP and employment data, but some are worried about sluggish productivity.

The economy expanded 2.4 percent last year, the fastest growth since 2010. And it added 2.95 million jobs, the most since 1999.

But productivity, which measures output per hour worked, slumped an annualized 1.8 percent in the fourth quarter and climbed only 0.8 percent for 2014 as a whole. That pales in comparison to average annual productivity growth of 2.2 percent since 1947.

"It's a major problem," Robert Atkinson, president of the Information Technology and Innovation Foundation, told USA Today.

Weak productivity hampers corporate profits and wage growth. Average hourly wages advanced only 1.7 percent last year, the lowest 12-month increase since October 2012.

And the 391 S&P 500 companies that have reported fourth-quarter earnings so far registered blended profit growth of only 3.1 percent, FactSet reports.

Some experts point at slow business investment to explain the drop in productivity growth. "We have turned into a society that is myopically focused on the short term," Atkinson says.

Ace economist Jeremy Siegel, professor of finance at University of Pennsylvania, is concerned about productivity too. "We've just had terrible productivity growth. We are trying to explain it. That concerns me a little bit," he told CNBC.

As a result, he thinks the growing number of Federal Reserve policymakers who want an interest rate increase in June are making a mistake. "I personally think that is too soon," Siegel said.

"Everyone talks about how strong the employment reports are, the payroll reports. What they're not talking about is how amazingly weak GDP growth is in light of this strong employment."

Given current data, the Fed should wait until the end of summer, he maintains. "I think it would be premature for the Fed to say everything's fine."

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Many analysts are excited about the economy based on recent GDP and employment data, but some are worried about sluggish productivity.
Atkinson, productivity, economy, wage
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2015-44-17
Tuesday, 17 February 2015 01:44 PM
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