When Numbers Are Unproductive; Conflicting Surveys Illustrate Dangers of Misreading Economic Data
Business productivity is one of those numbers policy wonks throw around when they talk about the economy: If workers produce more in the same amount of time, the economy can grow more.</br></br>So the Labor Department's report yesterday that productivity of U.S. businesses fell 1.2 percent in the three months ending in June sounds like bad news - if it's accurate.</br></br>The Labor Department attributed the decline to increases in hours worked and in the number of people working, as revealed by its survey of employers. But the department's survey of households shows that the number of people working has grown about one-sixth as much as the employer survey says. And if the household survey is right, then the work force has not grown as much, and productivity probably has not fallen as much, which is better news for the economy.</br></br>It's not easy to get a handle on precisely what is happening in an economy undergoing big changes in what businesses produce, how well they produce it and whom they hire to produce it. Reliance on any one statistic may lead to misjudging the height of the forest based on one misshapen tree.</br></br>Paying too much attention to economic indicators that don't tell the whole story can skew policy, according to Robert Brusca, chief economist at Nikko Securities Co. International in New York. If wages are rising but productivity is falling - which is what the payroll survey suggests is happening - then inflation looms.