GDP in decline for 20 years?

As Wendy reported here:
https://discussion.fool.com/paid-more-to-produce-less-35152647.a…
from the WSJ: Quarterly productivity figures are volatile, but the weak second-quarter number follows a 7.4% pullback in the first quarter, the sharpest drop in 74 years. …

John Mauldin, in his “A Weird Recession” newsletter, July 29, 2022, 2 weeks ago, has a section “Productivity Problem”. The hot link will take you to the relevant section.

One final thought. We use GDP as a proxy for economic growth. What it really measures (with a lot of flaws) is output, or production. That’s the “P” in GDP: Gross Domestic Product.

At the most basic level, GDP is simply the number of workers a country has times the average worker’s output. That’s what we call productivity. A worker takes something—knowledge, building materials, whatever—and adds value by producing something new. Combine all that new value and you get GDP growth.

If you want more GDP, math says you need some combination of more workers and/or more per-worker productivity. Postwar US economic growth happened for both reasons, but mainly productivity growth.

With population growth slowing, GDP has been more dependent on productivity growth. This is becoming a problem.

Mauldin blames the slowing GDP on the fiscal stimulus plans that pumped money into the market, and resulted in ‘stock buy backs’ rather than ‘growth’.

Mauldin includes a graph “Real Output Per Hour”, as a proxy for Productivity.
Based on this graph, Mauldin says that GDP has been declining for the last 2 decades.

That’s a noisy chart but if you take out the last two recession spikes, it looks like productivity has been broadly declining since the mid-1990s.

If you squint, and eye-ball a "mean’ line through the data points, you can almost see an inflection point about 1998, with the last 2 decades trending downward.

Now, add in the demographic factors that are shrinking the workforce. And on top of that, add the not-insignificant number of pandemic-driven early retirements and “Long COVID” disabilities. That means we need more productivity from the remaining workforce.

This is looking like a challenge. United Airlines CEO Scott Kirby said in a recent interview that sickness-related absenteeism is now so high, he thinks airlines will have to permanently add 4%?5% more workers just to accomplish the same amount of work. That’s staggering and, if correct, I see no reason to think it won’t apply in many other industries.

If a company now needs, for example, 105 workers to produce the same output that used to be possible with 100 workers, it is negative productivity growth.

MORE workers/labor in order just to MAINTAIN current output.
Mauldin blames this on the fiscal policies of the FED/government.

Mauldin uses McDonald’s attempts to use AI to fill the productivity gap as an example that AI and Robotics are not yet functional.
McDonald’s CEO Chris Kempczinski talked about automation on the company’s last earnings call.

“We’ve spent a lot of money, effort, looking at this. There is not going to be a silver bullet that goes and addresses this for the industry… The economics don’t pencil out,.”

hmm…:-
ralph

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Mauldin’s July 29 newsletter link:

mauldineconomics.com/frontlinethoughts/a-weird-recession

:slight_smile:
ralph

This is looking like a challenge. United Airlines CEO Scott Kirby said in a recent interview that sickness-related absenteeism is now so high, he thinks airlines will have to permanently add 4%?5% more workers just to accomplish the same amount of work. That’s staggering and, if correct, I see no reason to think it won’t apply in many other industries.

Delta Airlines pilots have been demonstrating that the airline is working them to the point of exhaustion. With exhaustion comes more health issues.

Delta pilots voice frustration over schedules, flight cancellations

In what the Delta pilots’ union called its first-ever open letter to customers, the union wrote: “We have been working on our days off, flying a record amount of overtime to help you get to your destination.” The union said if this rate of flying continues, by fall its pilots will have flown more overtime in 2022 than 2018 and 2019 combined.

https://www.ajc.com/news/atlanta-airport-blog/delta-pilots-v…

I don’t think there are FAA regs limiting how many hours the airline can try to beat out of mechanics, baggage handlers, and counter staff.

The “JCs” continue to schedule more flights than they can staff.

Steve

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“The “JCs” continue to schedule more flights than they can staff.”

Said another way, the company plans require hiring that just doesn’t seem to happen. They’ll limp it along until they reforecast or they get the people.

We are now bussing people between locations because we cannot get workers to sign up in our adjacent community. Despite us offering wages $3 higher than other industry, there are no additional workers willing to show up.

Either we move the work, continue bussing people around or down size our plans.

It’s all just mathematics. The trouble is, people don’t want to revise their plans after they have been punched in the mouth.

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We are now bussing people between locations because we cannot get workers to sign up in our adjacent community. Despite us offering wages $3 higher than other industry, there are no additional workers willing to show up.

I am just a worker bee. I make top union scale in the telecommunications industry. I have held, but do not currently hold, high level security clearances and have demonstrated the ability to work far above my current output.

I am nearing retirement. Today, on an annoying day, I consider retirement, and maybe taking a job cleaning toilets in Yellowstone or something. In reality, I will seriously consider retiring in 4 years and must retire at 7 (The economics will simply force me out.)

Yesterday was a bad day. A lot of traffic, things went poorly etc. When I sat down my LinkedIn feed popped up a job, work from home telecommunications with the company located in Reston. I looked at it and thought, can I trust these people, why would I trust these people, what skin are they going to have in this game. The job was 25 percent more, at least, than what I am currently making. I wouldn’t even click the link to send a three year old dusty resume.

When you ask people to give up what they have, and those people have been burned, or seen friends burned, and you are not willing to put skin in the game, throwing higher wages will not help. It is going to take training, paid moves, and above all a lot of word of mouth to to build a work force.

Just like Walmart wiped out Kmart, like Japan up ended Detroit, like Google ate Yahoos lunch the companies that understand that the last 50 years of excess labor is ended and adjust to that will prosper. Those that do not will end up
like Kmart, Detroit and Yahoo.

Cheers
Qazulight

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like Google ate Yahoos lunch the companies that understand that the last 50 years of excess labor is ended and adjust to that will prosper.

Yahoo!'s problem was that they didn’t get that it was the end of the “directory” era just like Detroit didn’t get that it is the end of the ICE era.*

March 29, 2005
WWW wars: directories vs. search engines

On the iHelpYou forum Dave Hawley said:

I’m starting to think that generic directories do not serve any purpose to the average Joe. While I have submmited and been included in many directories, I notice the traffic from them is constantly getting less, while SE traffic is ever increasing. It seems to me that directories have passed their use by date as SE are now so good at returning relavant results. I simply cannot think of any real reason why a user would even use them??

https://softwaretimes.com/files/www%20wars-%20directories%20…

The Captain

  • The transition to EVs will be slower than the transition to SE (search engines) but it is just as inevitable. BTW, specialized directories still have their place just like fossil fuels will still have their place for centuries.
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just like fossil fuels will still have their place for centuries.

I don’t think they will.

Oil will still have its place, though.

We’re already more energy-efficient than nature in converting air, water, and sunlight into hydrocarbons - but nature’s been at it a lot longer than we have and, in spite of its horrible inefficiency, has built up substantial deposits that we can tap at lower cost than making the stuff ourselves. That will eventually not be true as (a) we get even better at making our own hydrocarbons and (b) the cheap-to-access natural deposits are tapped out.

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Thank you for recommending this post to our Best of feature.

Yahoo!'s problem was that they didn’t get that it was the end of the “directory” era just like Detroit didn’t get that it is the end of the ICE era.*

* The transition to EVs will be slower than the transition to SE (search engines) but it is just as inevitable. BTW, specialized directories still have their place just like fossil fuels will still have their place for centuries.

Thank you for being one of those posters who give supporting evidence (links) for your statements.

Others just post claims and demand we believe them without evidence.

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