U.S. productivity rises at fastest pace since end of 2013

Well, yes, isn’t that one of the essential problems with our economy? But the picture isn’t as bright as it seems. The boost was forecast to be larger, given lagging numbers the past few years. And why isn’t productivity in the United States rising? Marketwatch writer Jeffry Bartash has it right:

One reason: companies aren’t investing as much as they used to, especially in equipment or training that might give workers the ability to produce more goods and services in the same amount of time. That’s the key to a rising standard of living.

Why is productivity so important? The following, from a NYU lecture in macroeconomics, sums it up nicely:

Productivity is the cornerstone of economic growth. We are richer than our grandparents and than the average person in the third world primarily because we are more productive. Productivity also affects our competitive position: the more productive we are the better we are able to compete on world markets. In short, productivity is the source of the high standard of living enjoyed by the developed economies relative to the third world or to the same economies fifty or one hundred years ago.

I don’t think CFOs and boards of directors get this at all. They think cutting costs leads to profits. They’re wrong.