Yeah, we cool. Sorry if I was harsh.
Sure it is. They were. My point is that (heh) pretty much everybody was way off given the growth that occurred. There were a fair number of people who predicted that job growth in 2003 would be anemic or even negative, but those folks also tended to have GDP forecasts which had a 1-handle – see below.
Two things. First, Absolutely BW is a mainstream mag – one of the better ones and a weekly read for me, even though all the factual stuff they report on is already on my desk before they mail the magazine – their analysis is often good, and frequently important whether it turns out good or not.
OK, second thing. But that doesn’t mean that every article in it agrees with the mainstream – in fact, their whole purpose (one of them) is to try to bring insights that are outside the consensus. If productivity growth estimates were 8% for 2003, you can be sure that BW would have had an article saying, “now wait a minute.” And that it would have been a good one.
Oops. This is three things, ain’t it? No one there made a specific prediction of job growth, as you say. But they kind of did, given an assumption of GDP growth. Basically, productivity growth is the combination of output growth and the units of labor required to produce it. So, if the economy puts out 4% more stuff (stuff in this context includes services in addition to physical stuff, of course) and requires 4% more person-hours to do it, there’s no productivity growth. If they put out 4% more stuff on the same number of hours, there’s zero productivity growth. (It is, of course, much much more complex than that because some stuff counts more than other stuff, measurement, &ct. &ct., but that’s the gist of it). So it’s possible that each of the people in the article, in addition to being low on productivity growth, was also thinking of a much lower GDP growth number, the sum of the two adding up to no job growth. But reading economists and talking to CEOs for a living, I’ll tell you that’s not anything like the consensus had in mind[sup]1[/sup]. As I said before, almost to a person if you said, “2003 will see 3.1% real GDP growth” they’d have said, “That means jobs. Lots of them.” A 3.1% growth with 2.5% productivity growth would, indeed, have meant jobs. If you had said, “2003 will see 3.1% real GDP growth and it will be comprised of much bigger gains in durable goods (7.1%) than in services (2.0%),” they’d have said, “OMG GOD FULL EMPLOYMENT INFLATION!!11!!!1!” Some of the headlines would even have looked a little like that.
[sup]1[/sup]: In fact, I’ve spoken to a lot of CEOs who expressed astonishment at productivity growth at their own companies. They aren’t the norm, of course – the norm is that I get overpromised productivity growth: “We’ll lay off 90% of our employees and double production, bringing costs down by an infinity percent.” Lyin’ bastids[sup]2[/sup]. But the fact that even some were surprised was something of a surprise to me. I normally hate surprises.
[sup]2[/sup]: New Wall St. geek joke: How do you know when a CEO starts lying? When he reads the Forward-Looking Statements Safe Harbor Statement.