The Best Economic News Yet

There was a great piece of news released yesterday by the Bureau of Labor Statistics here. Multifactor productivity is up. A lot.This might prove even more important than news that filing for unemployment is at its lowest in four years. Multifactor productivity is the highest it's been in a quarter of a century.

Multifactor Productivity matters. It measures how much value labor and capital are creating. When it goes up, there is more money to pay both capital and employees.

From 1987 to 2010, multifactor productivity rose 0.9 percent. 
From 2009 to 2010, it rose 3.5 percent, more than triple the average of the last quarter century.

This feeds into my sense that we're at the dawn of big gains in productivity, stock values, and wages. Higher productivity means we're creating more value. That's good news.

caveats: 

1. I'm not going to get into the fact that at different times labor is more or less able to get their fair share of this joint gain in productivity. Suffice it to say, if multifactor productivity doesn't go up, wage increases are not going to happen; the more it does go up, the greater the possibility that wages will go up.
2. I still think that until corporations become more entrepreneurial, these economic gains won't necessarily translate into widespread job growth. If jobs grew at the rate that they did in the 1960s, we would be experiencing average annual job growth of about 5 million jobs per year. That works out to more than 400,000 per month, or roughly double the good reports we've seen the last few months.
3. Also, the recession itself may have played a part in this, Hesitant to invest, companies recovering from the recession may have found ways to raise their productivity without further investments or hiring. If that is a one off thing, then this will be a blip; if it suggests new levels of resourcefulness, it could become a new trend.