- Everybody keeps talking about QUIET QUITTING.
- QUIET QUITTING.
- Have you heard the phrase, QUIET QUITTING?
- [Narrator] In 2022, American workers say,
"They are taking a step back from their jobs,
which isn't great news for the economy.
- The prosperity of the whole country
and the prosperity for you and me,
depends on productivity.
- [Narrator] US worker productivity in 2022,
had the steepest drop in the last 74 years.
Here's why labor productivity
is so central to the economy.
And why big drops,
can be difficult to recover from.
(upbeat music)
"Productivity is the amount of output
of goods and services that workers produce
for every hour they put into their jobs."
What most economists look at
is the productivity rate,
which is calculated
by the Bureau of Labor Statistics or BLS.
The BLS finds the productivity rate,
by dividing the national output
by total labor hours.
It might seem simple,
but actually, there are a lot of factors at play.
- So there's a lot of inputs,
and a lot of data that get revised later on,
that make it one of the more complicated statistics
to put together.
- [Narrator] Going back to the equation,
let's look at labor hours.
That includes hours worked by wage and salary workers,
the self-employed, and unpaid family workers.
The other input, national output,
comes from the Bureau of Economic Analysis.
The main factor is Gross Domestic Product,
"A measure of the nation's output
of all goods and services."
Including things like food,
gas, and healthcare,
but the equation also leaves some things out.
- When officials measure productivity,
they're trying to look at
the activity of the private sector.
So they'll strip out things like farms,
they'll strip out things like nonprofits.
What they're trying to do
is get to the kind of core of the business sector
of the United States.
- [Narrator] And it's a metric
that can be important for workers.
- The productivity of workers
is a key ingredient in creating income,
whether it's corporate income in the form of profits,
or whether it's individual income,
in terms of earnings.
And that really is the path to prosperity.
- [Narrator] And because productivity
is so vital to the economy,
variations in the rate can cause repercussions.
Let's look to this drop here, in the 1970s,
to find out why.
A drop like this can indicate a PRODUCTIVITY SHOCK.
- Well, PRODUCTIVITY SHOCK
is when something good happens or bad happens,
that changes the ability of workers
to produce whatever it is they produced.
- [Narrator] There were a lot of things going on
in the 1970s,
like when OPEC Nations implemented an embargo in 73',
pushing upwards prices for oil and gas.
And while those costs were going up,
so was the amount of workers,
as a large influx of women looked for jobs,
driving a labor surplus.
And increased competition
from Japan and Germany disrupted trade.
All of these factors together,
led to a productivity slump.
But the FEDERAL RESERVE
responded in a way that made the situation worse.
- So they pumped a lot of money into the financial system,
which lowered interest rates,
and those lower interest rates and the more money,
instead of getting the economy to grow at a fast rate,
just created inflation.
And underneath it all,
was that the economy didn't have the capacity
to deliver as many goods and services
as it had been doing before.
They made a mistake,
and it made a bad inflation problem, even worse.
- [Narrator] It took the FED years to fix that problem,
but not all PRODUCTIVITY SHOCKS are negative.
- In the 1970s, we had a negative shock.
In the 1990s,
we had a different kind of PRODUCTIVITY SHOCK.
- [Narrator] This time, it was a positive one,
a tech revolution that led to rising productivity.
- Indeed, data on our national economy in recent months,
are beginning to support the notion
that productivity growth,
the basis for increases in earnings
is beginning to pick up.
- Computer chips were being produced
at a faster and faster rate,
with higher and higher capacity.
The internet became a thing.
Mobile technology advanced.
And so worker productivity grew
because of that technological shock,
and that led to a lot of benefits for the whole economy.
- [Narrator] The high productivity,
meant businesses could sell more,
pay workers more, and increase profits,
while leaving prices largely unchanged.
But it didn't last,
due to a stock market bubble that burst.
- It was the bubble.
The bubble has now burst.
(bell chiming)
- We've all been waiting for the next productivity boom,
and we haven't gotten it.
And we were seeing improvement before COVID hit,
and then that changed the whole story.
The breaking news, stay at home,
that is the order tonight from four State Governors,
as the coronavirus pandemic spreads.
- [Narrator] The pandemic had significant effects
on worker productivity.
Manufacturers and global supply chains,
operated below capacity.
Ships were stuck at port,
and workers were stuck at home.
To keep people spending,
the FED moved aggressively to stimulate demand.
- The FED thought that the worker productivity
would kind of go back to the way it was before the pandemic,
and it didn't.
And in the process they overstimulated demand.
So when you have too much demand
in too little supply,
you get inflation,
and that's just what we got.
And fundamentally, at at the root of it,
was because FED policy makers,
didn't really understand
how the productivity tides were shifting,
once again, underneath their feet.
- [Narrator] In the first quarter of 2022,
productivity fell over 7%.
Then in the second quarter, it dropped another 4.6%.
- Productivity is ultimately,
the source of wage growth for workers,
profit growth for companies,
and economic advancement.
So it's really central to the prosperity
of the economy as a whole,
and the wellbeing of millions of Americans.
- [Narrator] Economists say, "Drops in productivity,
also make it even harder for the FED
to accomplish their goal of lowering inflation."
- We're not gonna know where we are,
I don't think for another year or so at best.
The risk is that we get more policy mistakes
before things really do settle down.
- [Narrator] And as productivity continues to shift
with current events,
it may take some time to settle down.