U.S. Productivity Still Matters

A few we days we quoted a money manager in Barron's who said this:

With China and India increasing the supply of labor and production, it's tough to see how inflation can really be a problem in coming years.

And we had this to say:

So oil prices are inflationary, while massive productivity gains (from huge labor supply, ability to outsource globally) are disinflationary.. Now imagine if we pit them head to head in a pushing match, and watched to see which overpowered the other. Who would win?

Well it probably depends on your time frame. Over the short-term, a spike in oil would overpower relatively slower moving productivity gains. But over the long-term, we'd like to concur with the quote above.

While cheap labor in India and China are certainly disinflationary, they could never be a substitute for productivity gains among our own workers as some view them. Why?  Because the rates that Chinese firms charge the U.S. for goods is based on the health of the dollar and its future prospects, which is based on our own growth and productivity.  If, say, productivity growth vanished, and the dollar were seen as vulnerable, prices on foreign-made goods would have to rise, totally independent of these pools of cheap labor.

Comments

[ティンバーランド]

京都府の担当者も「処理の実働部隊となる市町村に受け入れを要請する際の国の基準が不明確で、検討する予定はない」としており、まずは国基準をさらに明確化する必要があると主張。滋賀県も、県内の全１９市町が「受け入れ困難」としているため、県としても検討していないという。

　ティンバーランドまた、近畿で唯一、広域連合に加盟していない奈良県の担当者も「県民の理解や感情論を考えると現状では難しい」と話している。