Another important point is that the same forces that cause the payroll survey of unemployment to underestimate the number of jobs relative to the household survey (more outsourcing, people working independently and contractor-based), also can mess with the productivity figures if one is not very careful. Those contractors who don't show up on the payroll in the same way as permanent employees add output without necessarily correctly adding units of work time, and hence raise productivity.

Of course, to buy this argument one also has to concede that the payroll survey overestimates unemployment.

I’m sure that we can legitimately debate the precise accuracy of productivity studies. But so what? Isn’t this an example of nitpicking to the extreme? There is sufficiently solid evidence to indicate that things are only going to get better. If nothing else, Moore’s Law seems a fairly safe bet. This alone should do the trick.

The critique of the way productivity is measured seems pretty good to me. So the number is pretty iffy. But that doesn't invalidate a measured productivity *increase.* Given the fairly large increase measured, I find it very unlikely that this can be explained by a sudden increase in unmeasured hours worked.

Stephen Roach currently lives in Connecticut and previously was employed by the Brookings Institution. Gosh, I may be jumping to an invalid conclusion, but Roach is likely a registered Democrat. Could he subconsciously be unable to admit that things are improving under a Republican administration?

But here is an interesting thing about the second to third quarter productivity increase. Looking at the BEA GDP numbers, most of the increase of GDP was in final sales of goods. You would think that the employment sectors mainly involved would be manufacturing, wholesale and retail. In each of these, payroll employment numbers stayed the same or declined slightly over this time span. So if you think the feds know how to measure goods output (whatever the problems measuring services), the productivity measure looks pretty real at this point, unless you think the sectors involved used a lot more "self-employed" or "contract" labor in the third quarter, or the hours per paid employee grew a lot. But the payroll survey and home survey numbers track pretty closely, second to third quarters, so if more self-employed labor is going into the goods chain, it's being withdrawn from the services sector. Any explanation other than the obvious one -- productivity is growing, by a lot -- requires such a complex of other happenings as to seem really unlikely.

Tony Aldrich is not wrong, but the productivity increases he is pointing to are concentrated in three sectors (manufacturing, wholesale, retail) for which existing measures of productivity are, respectively, pretty good, not so good, and not good at all. Measures for service industry productivity, which was Roach's focus, are much less reliable, and this matters because the service sector is where most of the employment is.

The other factor to consider is how much of the surge in economic activity is due to the increased willingness of consumers to take on more debt. To the degree this is a factor we need to be aware that it cannot remain one for long, not at a time when levels of consumer indebtedness are already very high and interest rates have nowhere to go but up.

“The other factor to consider is how much of the surge in economic activity is due to the increased willingness of consumers to take on more debt. “

Consumer debt is a secondary issue. We should not ignore the sharply decreasing prices. A reliable VCR can be bought for under $50.00. The cost of food is a joke. Most of us earn in a few hours enough money to eat for a week. These prices will almost certainly continue to drop.

Not for nothing, but 10% productivity gains in a year? Isn't that a little hard to swallow, just on its face?

Where is the revolutionary change in technology, machine or human, that could explain such a huge jump?

Moreover, this jump is said to have occurred at a time when unemployment was either steady or declining (very) mildly -- i.e., we had either roughly the same workforce as before, or one that was, at the margins, pulling in less productive workers. And, we had been experiencing decent productivity growth for some time now - we were not starting from a temporarily depressed baseline.

How can such a jump possibly express a real change in output?

Lots of problems with productivity measurement, not least among them the difficulty in attributing output change to changes in labor input flows versus capital service flows (the latter nearly impossible to measure accurately if capacity is changing, which it always is outside of some theoretical long-run eqbm.). Remember that a production function takes flows as both its arguments and returned value. Generally in productivity measurement, even fairly sophisticated measurement, you have data on labor input flows but have to make assumptions about capital service flows, while using stock data for capital. So changes in utilization (as well as on the intensive margin for labor effort itself) creep in here.

But in any event, the problems aren't new problems, and whether it's actual productivity or some productivity/utilization melange that's being measured it seems like good news.

We should not ignore the sharply decreasing prices. A reliable VCR can be bought for under $50.00. The cost of food is a joke. Most of us earn in a few hours enough money to eat for a week. These prices will almost certainly continue to drop.

Never saw it more clearly stated that David Thomson is out of touch with reality. Housing costs are the great expense on most people's incomes: for 3 in 10 American households either rent or mortgage payments cost 30% of their monthly income, which is an "affordability issue" according to lending companies: and 1 in 7 Americans spend 50% or more of their income on housing.

Next to this problem the cost of a VCR is trivial. (And cheap food is an issue all its own.)

Which leads back to my point about consumer debt. Low interest rates tempt people to borrow more, enabling them to buy larger and more expensive houses, and housing construction is an important component of recent economic growth. This cannot go on forever, and it isn't a political question.

“Housing costs are the great expense on most people's incomes: for 3 in 10 American households either rent or mortgage payments cost 30% of their monthly income...”

And what is your point? What is so shocking about these housing cost percentages? Americans today commonly live more lavishly than the well to do of earlier generations. Who doesn’t have indoor plumbing, a TV set, a DVD player? Also, what point are you tring to make regarding “cheap food is an issue all its own?” I quickly perused Michael Pollan’s piece---and conclude that he is most certainly providing evidence to support my main point! What use is he to you?

I haven’t had the opportunity to order Gregg Easterbrook’s new book, The Progress Paradox : How Life Gets Better While People Feel Worse. Yet, I suspect it might be very relevant to this discussion.

uh, JSurge - never in my adult life has housing cost me *less* than 30% of my total fixed outlays every month. Since it seems to have not been a significant variable, I plan accordingly. AS SHOULD EVERYONE ELSE. I find it hard to believe you have a stat tucked away somewhere that says most peoples experience is any different than mine. Infact, the Stat you do use, supports me.

What's your point?

and by the way, you're even wrong about Dave - he's been demonstrably more out of touch. THe recent oldman/harvard/slut thing of a few days past, for instance.

Mr TommyG,

Here to play the foil again, and here you are foiled! Housing prices are going up about 6% per annum. Wages are not. Hence it is not just that housing costs are about 30% of income, but that they are an increasing share of income.

Something similar happened in the 1970's. In order to show inflation wasn't going up, the government kept stripping out items like jewelry where the prices were rising. Pretty soon, it got so ridiculous that the inflation gauge wasn't measuring anything important.

If medical services, housing, insurance, and education costs are all skyrocketing year after year and form an increasingly larger absolute and relative portion of spending this means that inflation as measured by the cheap consumer goods in the CPI are vastly underestimating the real cost of living, the real inflationary rate, and the real cost of borrowing.

We really are getting poorer, not just b/c we're losing jobs, or the jobs that replace them are paying less, but also because the cost of living is increasing. Thus why people are borrowing more and the explosion of credit.

David Thomson asked: And what is your point?

That you're out of touch with reality... ;-)

TommyG, you have a point about the "intellectual slut" thing showing that DT was even more out of touch with reality. Basically I think DT and reality are probably not even on speaking terms.

The point about housing costs taking up a large and rising proportion of the household budget is that this large and unavoidable expense is essential to maintain a steady income - yet all too easy to lose. You can budget for your housing costs and yet still lose your housing in disaster - and disaster can strike at any time. The poorer the household, the more likely a large proportion of their income is taken up by housing costs, the less likely they can spare money to create a financial cushion against disaster, the more likely they are to lose their home should disaster strike. Homelessness is a major problem.

Oldman, C'mon the 6% figure is for new housing costs, that doesn't have anything to do with people that are currently in housing. My Mortgage rate has not gone up 6%, ever.

That said, I write most of this under correction, as you're the SME here.

That said, I concur with your Para 3, especially as regards to CPI. But, again, would drop the 'housing' from your opening sentence. Why would you include it?

Also, for the sake of the thread, please address JSurge's 2d Para. My take is this:

JSurge,

1)Disaster: I assume you mean financial disaster (as in loss of employment) because it would be absurd to mean physical disaster: HH isurance is not just a good idea, it's typically required by the lender.

2) Without touching your hyperlink, What you mean to reference is 'houselessness' not 'homelessness'. The first is untrue, the latter, a fiction. Give me your MSA and I'll send you a realtor link that can put you in a dwelling for 30% of your income.

3) I Mean no clever offense by 'Jsurge', just tired of going back and forth to get the proper spelling of your 'web ID' Is there a different shorthand you can recommend?

1)Disaster: I assume you mean financial disaster (as in loss of employment) because it would be absurd to mean physical disaster: HH isurance is not just a good idea, it's typically required by the lender.

Actually, physical disaster can lead to financial disaster, and financial disaster can lead to homelessness, even if you're fully insured. And that doesn't apply to people who rent because they can't afford to buy.

Without touching your hyperlink, What you mean to reference is 'houselessness' not 'homelessness'. The first is untrue, the latter, a fiction.

I'm at a loss to know what you mean. "Houselessness" is certainly not "untrue" - many Americans don't own or rent a house. "Homelessness" is unfortunately no fiction at all - it exists.

Give me your MSA and I'll send you a realtor link that can put you in a dwelling for 30% of your income.

Okay, let's say I earn $10 712 a year before taxes. (I don't: this is an example of someone who works 40 hours a week, 52 weeks a year, and earns minimum wage.) You're claiming that someone whose take-home income is something like $650 a month is going to be able to find a dwelling for only 30% of their income (that's $267.80 pcm)? My guess is more like 50% or more, if this individual were able to find anywhere to live at all.

I Mean no clever offense by 'Jsurge', just tired of going back and forth to get the proper spelling of your 'web ID' Is there a different shorthand you can recommend?

Tommy, I take no offense at all at however my webID is spelled - JSurge is fine if that suits you. I was looking for a unique ID and I made one, but of course it's also impossible for anyone but me to spell correctly. You win some you lose some...

“Okay, let's say I earn $10 712 a year before taxes. (I don't: this is an example of someone who works 40 hours a week, 52 weeks a year, and earns minimum wage.)”

Most of the homeless are substance abusers and mentally ill. Also, few people who only earn $10,712 annually are living by themselves. They normally share the expenses with at least one other person. The remaining homeless probably represent less than 1/4% of the general American public. In other words, this is not a major issue!

96.4% of statistics are made up on the spot.

Honestly, Thompson - what do you think you're accomplishing by inventing a bunch of numbers off the top of your head? You want to convince people, do research, look stuff up, cite facts. This kind of random invention is peculiarly unconvincing.

MR. Jesurgislac,

The language that I find troubling with your assertion is the implication that, one - housing is a bad thing; and, two - it nefariously 'happens' to people.

To wit, your assertion:
"...is that this large and unavoidable expense is essential to maintain a steady income - yet all too easy to lose."

I'm staring at yuor quote, and, well, truth be told, you mangled it. You meant to say that housing costs a lot, and so therefore even if you have it now, you're in danger of having it taken away if you lose your job. Agreed? Not being smarmy - I read it the way you intended it too, only just now noticed that it's scrambled.

anyrate...It is not an 'unavoidable expense' anymore than someone's Omega Watch is. Perfectly good Timexs available. My Speedmaster didn't stalk me - I chose it.

Ohhhhhh. Choice. Choices. You know, the front-side of consequences. That's the nexus.

Honestly, Thompson - what do you think you're accomplishing by inventing a bunch of numbers off the top of your head?

Fair enough? What numbers can you provide concerning those who are homeless---and not also substance abusers, mentally ill, or grossly immature?

Arthur, are you seriously arguing that it's a viable option today just not to have anywhere to live? Seriously? Because that's what your post at 04:08 appears to be stating: that having a place to call your own is no more important than having a nice watch. This seems so bizarre a post that I'm convinced I've misunderstood you and am therefore asking you to clarify the point you're making.

Additional note to David:What, you can't be bothered to do the research for the point you want to make, so you're telling me to do the research for you? You made an assertion at
03:12 PM without any reference to any source of fact: run along and do your research for yourself.

“Additional note to David:What, you can't be bothered to do the research for the point you want to make, so you're telling me to do the research for you? You made an assertion at 03:12 PM without any reference to any source of fact: run along and do your research for yourself.”

Your wish is my command. And guess what? It turns out my earlier suspicion that the “remaining homeless probably represent less than 1/4% (1/4 of one percent) of the general American public” was fairly accurate. I googled the following:

“According to figures provided by the US Department of Health and Human Services, up to 600,000 men, women, and children go homeless each night in the US.”

http://www.warmingfamilies.org/homeless_stats.html

Let’s see, don’t we have around 290 million people currently living in the United States? Do we have any mathematicians in the house? Also, I seriously doubt that the above figures were broken down like I preferred. If this is indeed the case, my estimate of .0004% of the general population may be a bit too high!

Mr. Jesurgislac,

Come now: The analogy is obvious, you're either being willfully obtuse or Thomsonesque.

Good night.

The third quarter figures do show a MASSIVE split between the household and payroll numbers. A difference between adding over one million and just under 200,000. That's a big difference, and does have to do with the productivity numbers.

Oldman-- housing costs may be going up, but at the same time the size of the average house is increasing, and the comforts included are increasing too. (Compare the heating and cooling systems in older homes to newer ones, for example. Or dishwashers.) That's David's essential point, of course, that you have to compare equal things. Education prices I won't defend (it would take a long time to discuss), but I certainly note that you can get 1960's-era medical care for very cheap. It's newly available care that's responsible for the increase. People who are saved by modern care who would be dead prefer having the care available to not, though.

Cars, too, of course-- comparing just how the average price of a car changes doesn't make sense, if the old car lacked safety features, environmental features, power, handling, and comfort features compared to the new one. When you're getting more, that explains part of the cost difference.

By any sort of survey measure, things like dishwashers, clothes washers, VCRs, TVs, cars, etc. are far more common now among the poor than they were among the middle class twenty years ago. That does reflect a measure of progress, and is a strong prima facie piece of evidence against people getting poorer.

My apologies on the last, David - seems you are trading in some rather solid mathematics. This limits your choices, I'm afraid, Mr. Jesurgislac.

Oh, Thacker - how dare you suggest that a nice car is more important than a home! Don't you realize that there is an epidemic of "Homelessness"? How insensitve. I hope JSurge gives you a good thumping.

Art sez: Come now: The analogy is obvious, you're either being willfully obtuse or Thomsonesque.

Neither one, honest. I don't see what you're getting at.

David, I see you still don't want to research the main thrust of your claim, which was the kind of people who tend to become homeless. Let me offer you a helping hand:

One of the fastest growing segments of the homeless population is families with children. A survey of 25 U.S. cities found that in 2000, families with children accounted for 36% of the homeless population (U.S. Conference of Mayors, 2000). These proportions are likely to be higher in rural areas; research indicates that families, single mothers, and children make up the largest group of people who are homeless in rural areas (Vissing, 1996). ..... Declining wages have put housing out of reach for many families: in every state, metropolitan area, county, and town, more than the minimum wage is required to afford a one- or two-bedroom apartment at Fair Market Rent (National Low Income Housing Coalition, 2000). In fact, the median wage needed to afford a two bedroom apartment is more than twice the minimum wage. (cite)

14.4 million families have critical housing needs.

...there is simply not enough affordable housing. The inadequacy of supply increases dramatically as one moves down the ladder of family earnings. The challenge is most acute for rental housing in high-cost areas, and the most egregious problem is for the very poor.

Interesting that although you cherry-picked one fact from one website that trivially corresponded with your guessing, you declined to research further into your unsubstantiated assertions... perhaps because had you looked, you'd have discovered you were wrong in every other particular? Or did you look, discover you were wrong, and hope that no one else would bother to look and point this out? Are you incompetent, or dishonest?

Mr. Thacker,

I don't mind a good discussion but your logic is so full of holes that frankly I would have flunked you from graduating high-school for such a specious peice of reasoning!

Yes, sure along with housing prices increasing their average size is also increasing as well as their likely consumer goods contents. I did not ever suggest that people were paying more for the equivalent size houses.

However such a fact has absolutely nothing to do with whether people can afford such a house at all. This is a point of pure logic. So yes, the people who can still afford houses are getting nicer houses. Though to be frank, no real estate specialist that I know of is claiming that the rise in prices is due to better dishwashers inside!

Less people can afford houses. And either the quality of what they can afford is declining, or they are having to work harder to afford what their parent's had - two income marriages and all.

So yes, low-income and lower-middle class people have more cheap consumer goods. No one has argued this. Walmart's success is undeniable. However they have less housing, less affordable education, less insurance, less health care, and less job security. Overall, the new costs outweigh the benefits of cheaper toliet paper.

Dispute with me if ye will, Mr. Thacker, but try at least to put the pretense of intelligent thought into your opinions before you cross witticisms with the oldman!

"Cars, too, of course-- comparing just how the average price of a car changes doesn't make sense, if the old car lacked safety features, environmental features, power, handling, and comfort features compared to the new one. When you're getting more, that explains part of the cost difference."

Well, if the old car lacks "safety features" such as an airbag, it might actually be more useful to families with kids, for instance. And if the government requires us to have features that we wouldn't otherwise buy, it's hardly a consolation to us that, "yep, those features are there, so quit whining about paying more for your car!"

With housing, you'll find government driving up prices there, too.

You have absurd zoning regs and building codes, which impose costs per lot, meaning not only do the houses cost more, but it's proportionally more added expense to build a cheap house than an expensive house; this pushes developers to build more expensive houses, and limits the availability and affordability of cheaper ones.

Plus, the authorities blatantly refuse to properly police cheap neighborhoods. You'll either kill yourself buying much more house than you need, or you risk getting shot.

Plus, politicians are pushing policies specifically designed to limit the number of new houses built.

Wal-Mart, and its customers, labor under no such burden, and Wal-Mart's customers find prices and offerings there improving year after year, unlike the housing market.

Mr. Ken,

You're confusing an argument regarding regulation for a mathematical point about measuring cost of living accurately. Market liberalism may improve consumer prices through competition, but it does not change the fact that education, retirement, housing, insurance, medical care, and similar social costs are rising far faster than incomes. The only way most families were able to keep up was to go to two-income families. That increases the social costs of divorce rates, etc. In addition, even that has been barely able to keep up resulting in increased financing of basic lifestyle through the explosion of consumer credit. It simply cannot go on indefinitely. Cheap consumer product prices are no longer a realistic measure of cost of living increases and therefore inflation. There will be an unwinding of the system sooner or later.

This really has nothing to do with your rant, seeing as market deregulation of key sectors will only exacerbate the problem. Yes, zoning laws are complex. However the real reason houses aren't being built is that it is not profitable to build them for the people who need them. You cannot solve this problem by getting Chinese laborers to build your houses for you Ken. Unless you would like to go back to the days before a FDA and anyone could sell snakeoil, or there were no fire codes. Does anyone recall the great fire of Chicago that got started by a pail being kicked over by a cow?

Similarly it is a lack of proper regulation that is pushing up medical malpractice insurance costs, deleteriously undermining the profitability of small medical practices.

Your intellectual capacity to comprehend these problems and how they can only be fixed by better regulation of markets and new collective incentives, rather than attacking regulation indiscriminately is rather limited. Or would you like to also go back to the days before a police force and criminals had dead or alive bounties on them? Would an unregulated market system reduce crime do you think? Go crawl back underneath your market theologist rock before someone mistakes your fanatacism for sense.