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JPMorgan Chase & Co
Here’s a depressing thought: America’s productivity is rising on the backs of scared office workers.
That’s essentially the explanation offered by Michael Feroli, chief U.S. economist at JPMorgan (JPM), for the 1.6 percent second-quarter gain reported Aug. 8 by the Labor Department. I asked him if there was anything in the data to suggest worker output was being spurred by improvements in technology or other investments—you know, encouraging stuff.
He used a process of elimination to bring me back to earth. “First, capital deepening [an increase in investment per worker] is unlikely to be especially strong right now, given that net investment levels are still on the low side,” Feroli explained in an e-mail. As for technology improvements, “one proxy for this is the percent change in real equipment and software prices.” Those have been declining slowly (PDF), which indicates “a not particularly fast pace of technological improvement.”
Finally, there’s “human capital”—knowledge, skills, etc. If anything, that’s slipping as a significant chunk of the workforce sits idle for weeks or months—more than 40 percent of the unemployed have been without a job for half a year or longer. “That leaves ‘unmeasured’ increases in worker effort as a plausible explanation,” Feroli says.
The Bureau of Labor Statistics estimates work hours from its Current Employment Statistics survey. The survey doesn’t capture the unpaid overtime of office workers, Feroli says, and he doesn’t think the Bureau’s adjustments to make up for that fully reflect how work is changing. Firms are told to report the standard workweek for salaried workers, he notes; “so Bloomberg is probably counting you at 40 hours, even if you’re reading and working on this story at 8 p.m.” (Check.) If you don’t like it, you’re probably sticking around anyway, as evidenced by the tiny number of workers who are leaving their jobs voluntarily. “Workers are still scared, and so probably could be induced to work harder or longer than usual out of fear of losing their jobs,” Feroli says.
The productivity number is calculated by dividing output by hours worked. If the denominator isn’t rising to fully reflect those fear-induced work hours, voila— productivity rises. Now stop surfing the Web and get back to work.