Carr: Productivity and Compensation Drop as Firms Delay Investments

Wednesday, 06 Jun 2012 11:27 AM

By Michael Carr

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The latest data from the Bureau of Labor Statistics highlight the struggles that consumers and corporations are facing.

Productivity fell for the quarter, but the most important information for consumers is that, on a year-over-year basis, real compensation declined by 1.5 percent in the first quarter of 2012.

Gains from slightly higher wages and increased hours worked were offset by higher inflation. Although official government statistics show that inflation is low, most consumers are finding that wage gains are consistently lower.

Editor's Note: The Final Turning Predicted for America. See Proof.

The drop in compensation was highlighted in the productivity and costs report.

Productivity, defined as how much output workers deliver in an hour, decreased by 0.9 percent during the first quarter of 2012. Workers are spending more hours on the job but the measured output is not matching the gains in labor.

This report is consistent with other economic data that is showing manufacturers are not investing in new equipment. Productivity declines when factories are using older, less efficient equipment.

As an example of the thinking in corporate America, Ronald Sargent, chairman and chief executive officer at office-supply retailer Staples Inc. was quoted by Bloomberg as saying, “I think we’re going to be really stingy on the kind of new incremental investments around growth initiatives until we can kind of verify the ones we’ve invested in work out well.”

Corporations are holding trillions on dollars in cash on the balance sheets, waiting for a better investment environment. Until they understand what taxes and regulatory costs will look like in the future, they are unlikely to put that cash to work.

The latest economic data confirm that current economic policies are holding the economy back.

Editor's Note: The Final Turning Predicted for America. See Proof.



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