All the spin doctors, economic mavens, political pundits seem to be off in a world all their own. Attaching great importance to the activities of gamblers and speculators on Wall Street, even the worst of news causes the stock market to make gains as each greater fool tries to get in and out before the even greater fools force the inevitable decline. No one is focusing on the two factors that, three-quarters of a century ago Harold Moulton pointed out were critical in an economic recovery: production and employment.
Nowhere is this more evident than in a headline that came across the internet today: PRODUCTIVITY FALLS WHILE LABOR COSTS INCREASE. As the article explains, "American companies experienced the largest drop in workplace productivity this spring in nearly four years and a rise in labor costs, suggesting businesses may no longer be able to squeeze more work out leaner staffs." Evidently, workers are becoming somewhat inured to the threat of job loss if they don't continue to sacrifice. Consequently, they will start demanding more pay for less work. This may mean that workers are beginning to feel that the worst is over and they have nothing to fear, or that the worst is yet to come, and they'd better get while the getting's good.
There are so many problems in orientation at which the article only hints that it would take another full series to cover (and, having said that, expect one day to see a blog series on "Production v. Productiveness). First, of course, is the whole idea of "productivity." This is defined as "output per labor hour" — in Kelsonian terms, the epitome of "one-factor thinking." "Orthodox" economists will go on for hours, sighing in exasperation if a binary economist says that they are trapped in one-factor thinking, and carefully explaining as if to an idiot that the science of economics recognizes many factors of production. Really? Is that why total output is measured in terms of labor alone? One factor.
The rise in labor costs is another issue. Why should "labor costs" be rising when "productivity" is falling? This is something of a paradox. If labor is becoming less productive, shouldn't it be getting less money, not more? If all production is due to labor, and labor is charging more for less, why isn't the American consumer rising up in arms? He and she are being systematically robbed, being forced to pay higher prices and get less. How is that a sign of economic recovery or even sanity?
Obviously, we could go on at great length on this — and we will, perhaps soon. The point is that an article such as that is a sign of a very sick economy, and the doctors not only have no idea of the cure, they can't even figure out the disease.