Productivity and deflation

Karl Denninger reaches a conclusion:

The Labor Department reported Thursday that productivity jumped at an annual rate of 6.9 percent in the fourth quarter, even better than an initial estimate of a 6.2 percent growth rate. Unit labor costs fell at a rate of 5.9 percent, a bigger drop than the 4.4 percent decline initially estimated.

In the real world this means:

Work harder and get more done. Get paid less. Suck it up, don’t complain, or you’re fired. That’s all.

And by the way, reduced pay per unit of work spells DEFLATION.

That’s not necessarily so. Inflation and an increase in the supply of labor can lead to reduced pay per unit of work; real weekly wages haven’t increased in the USA since 1973. But in general, declining labor costs do tend to point towards deflation, especially if they are nominal as well as real. Productivity up and costs down is a good thing for corporations; whether that is good for the smaller number of workers working and the reduced pay they are receiving may not turn out to be good for an economy already facing widespread defaults. Especially if those corporations happen to be foreign corporations sending those profits overseas.

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