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April 16, 2007

The real threat to the economy

While concerns about the economy today center on the stock market, housing market, inflation and energy costs, some economists think there is an even bigger threat. Mike Walden describes what it is and why it's significant. Listen

"It's the potential for slowdown in worker productivity. Now productivity simply means how much we produce, how much output we produce, in a given period of time. And higher productivity means we are producing more in the economy for the same work, and we are creating more income and creating more wealth," says Dr. Walden, a professor of agricultural and resource economics at NC State University.

"And, indeed, in the last decade we have really been on a productivity spurt, probably a lot due to computers and technology," he continues. "Some economists estimate that just due to productivity gains, we have increased income by $6 trillion in the last decade in our country.

"But -- here is the big concern -- if you look over the last three years productivity growth has slowed down. We are still getting ahead, but we are getting ahead at a slower rate.

"Now this may be temporary, but if it's not temporary, if we are moving into a period where we have much slower gains in productivity, that's going to effect everything in our economy –- from earnings to wages to standards of living to inflation," Dr. Walden concludes. "So this is perhaps the most important economic gauge –- productivity -- to watch."

Posted by deeshore at April 16, 2007 11:23 AM

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