Meltzer on the Labor Market
In an earlier post, I asked,
What is the likelihood that some of the weak job growth and strong productivity growth of the past two years is in part a statistical mirage?
Allan Meltzer says that the likelihood is high.
What many companies have done is outsource some services previously performed in house. For example, cafeterias become independent enterprises. Often the same people report to work at the same places, but they now work for a different employer, perhaps a start-up. They may receive fewer benefits and perhaps lower wages. The company is able to reduce costs without reducing services. It now has fewer employees and the same output of manufactured goods, so it reports that labor productivity — output per person employed — has increased, in some cases dramatically. The official statistics record the change.
Just remember–you heard it here first!
UPDATE: Someone named Larry left a comment with a link to a helpful analysis.
For Discussion. If Meltzer is correct that the problem is a lag in the statistical reporting of payroll employment, then will employment growth in the payroll survey tend to be overstated in future months?