WEBVTT - Syverson: America has a productivity problem 0:00:00.520 --> 0:00:07.480 Broadcasting live to New York, Bloomberg eleventh, Rio to Washington, 0:00:07.560 --> 0:00:11.639 d C, Bloomberg one to Boston, Bloomberg twelve one to 0:00:11.760 --> 0:00:15.840 San Francisco, Bloomberg nine sixty to the Country Series Exam 0:00:15.920 --> 0:00:19.560 General one ninety and around the glow the Bloomberg Radio Open, 0:00:19.680 --> 0:00:24.760 SAP and Boomberg dot Com. This is Bloomberg Surveillance. Good morning. 0:00:24.760 --> 0:00:27.480 I'm Karen Moscow along with Tom Keene and Michael McKee, 0:00:27.480 --> 0:00:29.560 and the opening Vale is brought to you by s 0:00:29.560 --> 0:00:32.680 C I Imagine, a global operating platform designed to deliver 0:00:32.760 --> 0:00:36.960 a differentiated and technologically rich investor experience. Find out how 0:00:37.040 --> 0:00:40.160 se I can help you succeed at sci C dot com. 0:00:40.200 --> 0:00:43.480 Slash Imagine. Songs are higher at the open. The SNP 0:00:43.640 --> 0:00:45.920 five hundred up six tenths per cent or twelve points 0:00:45.960 --> 0:00:49.680 to two thousand two. The Dow Jones Industrial average is 0:00:49.800 --> 0:00:53.240 up half a percent or seven seventy nine points to 0:00:53.320 --> 0:00:56.440 seventeen thousand, seventy four. Then as to accept one percent 0:00:56.560 --> 0:00:59.640 or forty eight points to forty seven ten tenure Treasury 0:00:59.680 --> 0:01:01.960 little change yield at one point nine three percent yield 0:01:02.000 --> 0:01:04.760 at the two year point nine four percent ninemex screwed 0:01:04.760 --> 0:01:07.000 oil of two point three percent or eighty six cents 0:01:07.040 --> 0:01:09.520 to thirty eight seventy of Barrel Comic School there is 0:01:09.520 --> 0:01:11.839 down four tenths per cent or five dollar seventy cents 0:01:11.880 --> 0:01:15.800 to twelve sixty the euro at allar eleven nineteen and 0:01:15.840 --> 0:01:18.520 the yen one thirteen point six four. Tom and Mike 0:01:19.280 --> 0:01:21.320 Caramesco thank you very much. Well, those of you who 0:01:21.520 --> 0:01:23.680 listen to this program regular leak and you know who 0:01:23.680 --> 0:01:26.600 you are. Uh No that we have spent a lot 0:01:26.600 --> 0:01:30.320 of time talking about productivity and why it is so 0:01:30.440 --> 0:01:33.920 low and what the consequences for the economy and for 0:01:34.560 --> 0:01:38.800 standards of living are. One of the questions that continually 0:01:38.880 --> 0:01:42.920 comes up is are we mismeasuring productivity because we're in 0:01:42.959 --> 0:01:49.520 an age of rapidly changing technology. Chad Severson is a 0:01:49.560 --> 0:01:53.840 professor at the University of Chicago's Booth School of Business, 0:01:54.200 --> 0:01:56.160 and he's done an unusual thing. He's looked at the 0:01:56.240 --> 0:02:00.720 data and you find owns Chicago and do that in 0:02:00.800 --> 0:02:03.800 a new in a new paper. The data do not 0:02:03.960 --> 0:02:09.440 support the idea that we are mismeasuring productivity. Yes, that 0:02:09.680 --> 0:02:13.959 seems to be the case in several different directions. Well, 0:02:13.960 --> 0:02:17.760 tell us about what you find. So I looked at 0:02:17.760 --> 0:02:23.959 a few things. Um first is what you see across 0:02:24.240 --> 0:02:27.760 several a couple dozen countries is the pattern is the same. 0:02:27.800 --> 0:02:31.160 So there was a productivity slow down that happened right 0:02:31.200 --> 0:02:36.840 around two thousand four, and uh, there is no relationship 0:02:36.960 --> 0:02:40.360 between the size of the productivity slow down in a 0:02:40.440 --> 0:02:44.400 country and how I T intensive. That country's economy is 0:02:44.919 --> 0:02:48.160 weather measured on the production side, which is, you know 0:02:48.320 --> 0:02:51.320 what fraction of the economy is accounted for by production 0:02:51.360 --> 0:02:54.519 of I T related goods or on the consumption side, 0:02:54.520 --> 0:02:58.400 so it measured by for example, broadband penetration. You you 0:02:58.480 --> 0:03:02.520 just don't see a relationship between technology and the size 0:03:02.520 --> 0:03:05.280 of the productivity slowdown, which is exactly what you would 0:03:05.280 --> 0:03:10.920 expect if if mismeasurement is causing the the productivity slowed, 0:03:10.919 --> 0:03:14.760 the measured productivity slowdown in that case, And then you 0:03:14.800 --> 0:03:17.239 can look at things a couple other ways too. If 0:03:17.280 --> 0:03:21.880 you people have tried to go measure UH in different settings, 0:03:22.000 --> 0:03:26.680 you know how much uh, the how much people view 0:03:27.040 --> 0:03:34.800 the benefits from from information technologies, things like basically trying 0:03:34.800 --> 0:03:37.400 to value what Facebook and Google and all that are 0:03:37.400 --> 0:03:40.120 worth to people. And even if you take the high 0:03:40.240 --> 0:03:44.000 end of those numbers, you can't explain anywhere near the 0:03:44.040 --> 0:03:47.240 amount output that's been lost by the productivity slow. Mean, 0:03:47.560 --> 0:03:50.040 that's that's a useful thing to remember here. What we're 0:03:50.040 --> 0:03:54.200 trying to explain is about three trillion dollars a year 0:03:54.960 --> 0:03:57.960 of missing output. So if you're gonna say, look, we're 0:03:58.000 --> 0:04:02.040 just productivity slowed down only because we're mismeasuring it, that's 0:04:02.120 --> 0:04:04.760 kind of the target you should have in mind. You 0:04:04.760 --> 0:04:07.120 you your work is first of all, we're thrilled to 0:04:07.160 --> 0:04:09.720 have you on and and the the again looking at 0:04:09.760 --> 0:04:12.400 the data is to be kind of helpful. What's so 0:04:12.480 --> 0:04:15.640 powerful about your work? Professor? As you go back, I mean, 0:04:15.720 --> 0:04:20.520 Krasner was Chicago in seven when John Kendrick did his 0:04:20.560 --> 0:04:23.839 study on electrification, and the bottom line is it's just 0:04:23.960 --> 0:04:28.400 history repeating itself, right, that's right. So if you look 0:04:28.480 --> 0:04:33.080 at what happened during the electrification the portable power, you 0:04:33.120 --> 0:04:37.440 see a strikingly similar pattern and productivity growth. There was 0:04:37.480 --> 0:04:41.200 a slow period of about a quarter century. People were saying, well, 0:04:41.240 --> 0:04:44.800 we have these great new technologies. Whereas the productivity then 0:04:44.800 --> 0:04:47.080 it's sped up, and that slowed down again. Now we're 0:04:47.120 --> 0:04:49.800 waiting for that next speed up that has not happened yet. 0:04:50.600 --> 0:04:53.000 We're in that's we're in the bebending slowdown since two 0:04:53.000 --> 0:04:55.560 thousand and four. This is similar to what happened with 0:04:55.600 --> 0:04:59.279 the adoption of electricity. But eventually we saw electricity really 0:04:59.360 --> 0:05:04.120 contribute to productivity games. That's true, there was a second 0:05:04.120 --> 0:05:09.040 wave of productivity growth with electrification. Uh. We're waiting for 0:05:09.040 --> 0:05:12.000 that with with I T and the technologies we have 0:05:12.080 --> 0:05:15.400 to day. But as hopeful as some folks are that 0:05:15.720 --> 0:05:19.000 it's happened and we're just not measuring it again, like 0:05:19.120 --> 0:05:21.279 I said, it's just when you take a closer look 0:05:21.279 --> 0:05:23.160 of the data does not seem to be there yet. 0:05:23.200 --> 0:05:25.320 We've had a lot of discussions on this. Of course, 0:05:25.360 --> 0:05:28.039 it is the national question and professor, if you're just 0:05:28.120 --> 0:05:30.840 joining us, Uh, folks, this is an important discussion on 0:05:30.920 --> 0:05:35.400 productivity with all with Mario drog yesterday. Chad Sibson, a 0:05:35.800 --> 0:05:41.320 Chicago booths with important research um capital dynamics, labor dynamics. 0:05:41.320 --> 0:05:46.360 Dominique Constant at Deutsche Bank is adamant. The investment is 0:05:46.400 --> 0:05:50.400 actually pretty good. It's just there's a wall labor coming 0:05:50.400 --> 0:05:54.200 in creating a lot of inefficiencies. Give us the dynamic 0:05:54.320 --> 0:05:57.600 right now, away from the I T analysis of what 0:05:57.720 --> 0:06:01.480 capital and what labor are doing, well, it's certainly true 0:06:01.839 --> 0:06:05.440 that you know, if you invest more and for a 0:06:05.480 --> 0:06:09.560 given sized labor force, you should expect labor productivity to 0:06:09.640 --> 0:06:14.120 go up. And by a lot of metrics, Uh, capital 0:06:14.160 --> 0:06:17.279 investment seems to have been lagging for several years. We 0:06:17.320 --> 0:06:23.279 seem to be behind on on housing investment for perhaps 0:06:23.320 --> 0:06:28.040 obvious reasons. On public investment, there's just been maybe a 0:06:28.160 --> 0:06:30.840 lack of putting capital into place. Now we've got new 0:06:30.880 --> 0:06:34.480 workers coming into the economy or back into the labor force, 0:06:34.560 --> 0:06:37.600 all those things are going to tend to lean against 0:06:37.600 --> 0:06:41.560 productivity in the short run at least. But then again, 0:06:41.600 --> 0:06:45.400 you know this slowdown started even before the crisis, So 0:06:45.480 --> 0:06:48.039 we're talking about not just short run trends. We're talking 0:06:48.040 --> 0:06:50.400 about longer run trends here that are operating at the 0:06:50.440 --> 0:06:56.880 same time. I look at productivity then, and you know, 0:06:57.120 --> 0:06:59.480 in every textbook, and this is through Chicago or any 0:06:59.520 --> 0:07:03.360 other school, there's this thing called total total factor productivity. 0:07:03.400 --> 0:07:06.600 It's basically, folks, the noise off the right hand side 0:07:06.600 --> 0:07:09.520 of the equation. How how are we doing with our 0:07:09.560 --> 0:07:12.720 technological progress? How do you fold that in to this 0:07:12.840 --> 0:07:17.160 equal comparison of electrification, and I t yeah, that's a 0:07:17.200 --> 0:07:21.200 great question. So basically, labor productivity comes from two things. 0:07:21.280 --> 0:07:23.800 One is capital investment, which we just talked about in 0:07:23.840 --> 0:07:27.280 The second thing is total factor productivity. Both of those 0:07:27.320 --> 0:07:30.760 have been slow during this labor productivity slowdown. So we 0:07:30.760 --> 0:07:34.520 were just mentioning that capital investment spent on the slow side. 0:07:35.000 --> 0:07:38.400 But it's not just that total factor productivity, which is 0:07:38.480 --> 0:07:41.320 kind of you know, for people to imagine what's going on. 0:07:41.440 --> 0:07:45.400 It's it's technological progress, for lack of a better term, 0:07:45.480 --> 0:07:47.240 you know, the more output you're going to get from 0:07:47.280 --> 0:07:50.720 the same amount of inputs. That is also slowed with 0:07:50.840 --> 0:07:54.119 similar timing to the labor productivity slowdown. So it seems 0:07:54.160 --> 0:07:57.920 that both of these things seem to be driving the slowdown. 0:07:59.200 --> 0:08:03.120 It was the antion of total factor productivity in the 0:08:03.200 --> 0:08:06.120 in the late nineties that got it's the last productivity 0:08:06.160 --> 0:08:11.000 boost from thousand and four. The same thing happened with electrification. 0:08:11.080 --> 0:08:13.640 A lot of that was total factor productivity as well. 0:08:14.640 --> 0:08:16.920 Chad Saverson has been us from the Chicago Boost. Look 0:08:16.920 --> 0:08:21.280 at continue our conversation productivity and uh, whether or not 0:08:21.680 --> 0:08:24.680 our bosses are really measuring what Tom and I do effectively? Well, 0:08:24.880 --> 0:08:27.040 we know we're non productive. I mean, Michael Barr is 0:08:27.080 --> 0:08:31.640 the only reason productivity advances at Bloomberg's surveillance. I'm going 0:08:31.720 --> 0:08:34.360 to keep the illusion going, keep illusions very good. That's 0:08:34.440 --> 0:08:37.160 very British of you, Michael Barr with the money illusion. 0:08:37.280 --> 0:08:42.160 Segue segui there into product activity. Seriously, folks, productivity, what 0:08:42.600 --> 0:08:45.520 they heat, whether we heard it from Chairman Greenspan or 0:08:45.640 --> 0:08:51.520 Chad's iverson, they heat of mystery. An analysis right now 0:08:51.600 --> 0:08:55.320 on this strange economic soup is like I've never seen that. 0:08:55.360 --> 0:08:59.160 The mystery of where are we with the nation's efficiency 0:08:59.400 --> 0:09:02.280 is really Rutton Center. The Dow likes to be efficient 0:09:02.360 --> 0:09:05.040 right now. Up a hundred and sixty points seventeen thousand, 0:09:05.120 --> 0:09:07.280 one hundred and fifty three on the Dow. The vix 0:09:07.360 --> 0:09:11.600 in a full stick seventeen point zero nine. Good news 0:09:11.760 --> 0:09:18.600 risk on for the markets. Now, let's check in with 0:09:18.679 --> 0:09:21.720 Michael Barr. Got the latest world initial hidlers, Mike Tom, 0:09:21.760 --> 0:09:24.160 thank you very much. Ben Carson made it official. The 0:09:24.200 --> 0:09:27.960 former Republican presidential candidate announced his support this morning for 0:09:28.120 --> 0:09:31.640 Donald Trump. They're two different Donald Trumps. There's the one 0:09:31.720 --> 0:09:35.280 you see on the stage, and there's the one who's 0:09:35.480 --> 0:09:41.800 very cerebral, sits there and considers things very carefully. Carson 0:09:41.840 --> 0:09:45.200 says he has buried the hatchet with Trump. Funeral services 0:09:45.200 --> 0:09:48.360 will begin later today for former First Lady Nancy Reagan. 0:09:48.760 --> 0:09:51.120 Four of the five living First Ladies will attend the 0:09:51.120 --> 0:09:54.720 funeral at the Reagan Presidential Library and Seni Valley, California. 0:09:55.040 --> 0:09:59.360 About a thousand guests seven invited, including former President George W. Bush. 0:10:00.040 --> 0:10:02.520 It would be the first New Jersey transit strike in 0:10:02.559 --> 0:10:05.600 three decades if they do not come to an agreement soon. 0:10:06.160 --> 0:10:09.160 Union workers were one of the busiest commuter railroads have 0:10:09.320 --> 0:10:12.960 set an early Sunday deadline a strike with strand tens 0:10:12.960 --> 0:10:16.000 of thousands of commuters in and out of Manhattan, New York, 0:10:16.520 --> 0:10:19.960 and some traffic experts say a work stoppage could cause 0:10:20.160 --> 0:10:24.600 twenty mile backups at the Lincoln and Holland Tunnels. Global 0:10:24.640 --> 0:10:28.079 News twenty four hours a day, powered by hours journalists 0:10:28.400 --> 0:10:30.600 more than a hundred fifty news bureaus from around the world. 0:10:30.640 --> 0:10:32.640 I'm like, Michael Bye, that's so important. We gotta sum 0:10:32.760 --> 0:10:35.520 that up. Likelihood Monday morning, Oh, it's gonna be mad 0:10:35.600 --> 0:10:38.280 because the New Jersey transit officials is saying they can 0:10:38.360 --> 0:10:41.600 only get four out of ten transit people who take 0:10:42.120 --> 0:10:44.360 the railroariors to get in and out on the bus. 0:10:44.480 --> 0:10:47.960 I've cut to the chase. Starting Sunday, Bloomberg Radio for 0:10:48.000 --> 0:10:50.160 all of you in Bloomberg eleven THREEO, New York and 0:10:50.480 --> 0:10:52.199 for that matter, around the nation that would like to 0:10:52.240 --> 0:10:56.120 follow us an important UH moment for New Jersey. Look 0:10:56.160 --> 0:11:01.920 for that Monday morning Bloomberg Surveillance Bloomberg surnounced brought to 0:11:01.960 --> 0:11:04.800 by Landrover Adventures yours for the taking. Visit Landrover triestate 0:11:04.840 --> 0:11:07.600 dot com for special lease and financing offers. Landroverer above 0:11:07.640 --> 0:11:08.080 and beyond