Back in March, I analyzed the productivity ‘surge’ of 2007-2009 and declared it “highly suspect.” (It was perhaps one of the longest blog posts ever).
Well, yes. As I predicted five months ago, reality has won, and productivity growth has been revised down. This morning’s productivity release revised down nonfarm productivity growth in the 2007-2009 period from 2.3% to 1.5%.
But I don’t think the productivity revisions are over. The published GDP stats, once you look under the hood, still tell a highly implausible story. Once I do the appropriate adjustments, the economic narrative changes:
*The bad news is that the U.S. economy is worse off than it looks, even now.
* The ‘not-so-bad news’, at least for Americans, is that the next round of the financial crisis is likely to hit the rest of the world harder than the U.S. , even if the government does nothing.
To be continued.