How can we have a recession if we have low unemployment and a growing labor force? The Biden administration claims we aren’t in a recession, since usually, a recession means growing unemployment (remember: a recession is when your neighbor loses his job).
More people are working yet production (what GDP measures) is going down. The Bureau of Labor Statistics (BLS) June 2 release https://www.bls.gov/news.release/prod2.nr0.htm# reported that during the first quarter of this year, labor productivity decreased an amazing 7.3 percent since hours worked increased 5.4 percent and output decreased 2.3 percent. BLS notes that this is the largest decrease in productivity since 1947, when the economy was struggling to shift from building bombers to washing machines.
What has caused the decline? Several possible explanations are offered: COVID is causing high unplanned absences, supply chain problems, and more experienced baby boom workers retiring to be replaced by less skilled new workers. In a recent interview, Scott Kirby, CEO of United Airlines: https://lemonadamedia.com/podcast/why-air-travel-is-such-a-mess-with-united-ceo-scott-kirby/ noted that United Airlines may be forced to hire up to 5% more workers just to deal with sickouts. Obviously, supply chain problems causing disruption in production, such as the auto industry faces from the chip shortage, also hurt productivity. Forcing experienced workers, such as pilots, to retire at what now seems an early age is yet another problem.
But let us not forget another source of lost productivity: the government. Every new government regulation forces businesses to divert some time and money to compliance, resources that could otherwise be used to grow production. Government programs to favor inefficient solutions to problems also reduce productivity. Subsidizing “green” energy production raises energy costs, reducing productivity.
(Remember: if you are subsidizing something, it probably isn’t the efficient solution, otherwise it wouldn’t need to be subsidized)! And Scott Kirby also claimed air traffic controller shortages and delays are a big part of the airport problem! The air traffic control system is entirely run by the government.
Reversing this decline in productivity is essential and should have the highest priority if we are to address any problem you choose to mention. Without higher productivity, we won’t be able to increase military spending, medical benefits, address environmental concerns or continue welfare programs. Sure, the government can print money and direct the funds to favored uses, but resources diverted to those uses must be taken from other uses, raising inflation and decreasing everyone else’s standard of living. Given current budget deficits and plans to expand government largesse (I’m talking to you Senator Manchin and the other democratic senators), which will further hamper productivity gains, additional inflation will be inevitable. Declining productivity means a declining standard of living.