Celebrate Some Good Economic News on this Labor Day

September 1, 2008 by  
Filed under Economics, Money and Behavior

I intend to take today off like most American workers.  Before doing that, I thought it appropriate to briefly mention some recent economic news that is relevant to this holiday and that is quite favorable in an economic sense.  (I know what you’re thinking – Mr. ToughMoneyLove is all about bad news – what’s up with the good news?  Hey – bringing the hard truth is first and foremost about the truth – good as well as bad!)

Last month the US Department of Labor reported that productivity increased at a 2.2 % annual rate for the second quarter.  (This is productivity in the nonfarm private business sector.)  This is excellent news in the midst of our economic slowdown.  It is similar to the increase reported from the first quarter 2008.

Why is this good news?  Inflation remains a significant concern for the U.S. economy, particularly with interest rates so low.  Increasing labor costs add more inflationary pressures.  However, with increased productivity, employers can pay their employees more out of the increased production output rather than by raising prices.  This reduces the inflationary pressure.  So, with this good news about increased productivity in the U.S. labor force, we have reason to be optimistic about future inflation.

So congratulations to my fellow American workers for being productive.  Today, however, is not a day to be productive.  So go forth and enjoy this holiday.  Then come back tomorrow for more hard truth about money and personal finance.

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