The worst economy on record?

In a previous post I noted that while unemployment is low, productivity likely fell during the second quarter of this year. Now the data for the first half of the year is in. Productivity fell two quarters in a row, and at an unprecedented rate of minus 3 1/2%.

Employment has recovered to pre COVID levels, though we should note three things. First, the labor force participation rate hasn't fully recovered. Second, the number of Americans working two full time jobs has reached a new high. Third, employment is still below the pre COVID trend. Inflation also seems to be in check at the moment, which is not too surprising considering that the money supply recently contracted.

A few moments ago the Fed announced its latest GDP forecast; GDP for the third quarter of 2022 is expected to grow 2.5%- compared to 4.25% growth in employment. Employment gains look impressive. However, a combination strong employment gains and comparatively weak GDP growth indicate further productivity problems. We are on track to the worst year for productivity in modern U.S. economic history.