U.S. workers aren’t producing as expected

Kai Ryssdal Jun 6, 2007
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U.S. workers aren’t producing as expected

Kai Ryssdal Jun 6, 2007
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Kai Ryssdal: The headline economic report was that productivity number. Companies got less out of their employees in the first quarter than the government had originally guessed. Worker productivity grew at the relatively low rate of just 1 percent — that’s about half of the earlier estimate.

If it sounds like a distinction without too much of a difference, well it sort of does. We called Greg McBride at Bankrate.com to clear things up.

Greg McBride:

With that productivity slowing, that’s a negative signal as far as inflation is concerned. That drives up employment costs, which ultimately has inflationary consequences.

Yes, inflation again. It was the name of the game in the markets today, too. Wall Street gave it up early. McBride says investors are finally realizing they’ve been laboring under something of a misapprehension.

McBride: The question really isn’t if the Fed is paying attention, it’s whether investors are paying attention to the Fed. The Federal Reserve, and Ben Bernanke in particular, have been very consistent in recent months talking about inflation, that that is the primary concern of the Federal Reserve. Meanwhile, investors have been holding out hope that holding out this dream that the Fed was going to cut rates.

It’s not only the Federal Reserve that won’t be cutting rates. Today, the European Central bank bumped its key rate up a quarter of a percentage point.

If you’re thinking right about now, yeah, that doesn’t make much of a difference to you, here’s Greg McBride one last time.

McBride One of the things about the United States’ economy is that we are very dependant on overseas investors bringing their money to our shores. That’s how we finance our current account and budget deficits. If all of sudden there are more attractive yields in other countries, Uncle Sam’s going to have to pay higher returns in order to keep those investors sending their dollars to the United States.

Greg McBride at Bankrate.com.

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