A friend sent me this story from this morning's Gray Lady asking,
Please just read this and tell me what this story is saying. I cannot follow it.I see what he means:
Nevertheless, let me 'splain it for you. You can bookmark this post for handy reference when reading Business Pages. There are only 3 stories about the economy these days:Productivity, the amount of output per hour of work, rose by 2.1 percent for all of 2006, down slightly from a 2.3 percent increase in 2005. It was the slowest pace since a 1.6 percent gain in 1997. But the 3 percent annual growth rate of the last three months of 2006 was nearly double what economists had been expecting.
Labor costs for each unit of output rose 3.2 percent for all of 2006, up from a 2 percent increase in 2005 and the fastest rise in worker wages and benefits since a 4.2 percent increase in 2000.For the fourth quarter, wage pressures eased a bit, rising by just 1.7 percent, a better outcome than analysts had been expecting following a 3.2 percent rate of increase in the third quarter.
- Workers are earning more, which is good. Wait, no! Actually it's bad because it causes the Fed to think inflation might rise and it will raise interest rates, so markets will fall and worker salaries will be cut. Wage increases lead to wage decreases!
- Housing prices were rising too fast and becoming unaffordable; the "bubble" finally burst and prices have reached a plateau, which is good because people can afford houses again. Wait, no! Actually it's bad because rising housing prices make people spend more on home improvement, so now they are spending less than they were, which causes the economy to decline and fewer people can afford homes. Affordable housing leads to unaffordable housing!
- The economy is growing at a strong and constant rate, which is good because people are becoming more prosperous and poverty is declining. Wait, no! Actually it's bad because economic growth causes inflation, see #1 above. Growth leads to decline!
