One Reason Job Growth Lags Behind Economic Growth

The apparent breakdown in the link between economic growth and employment may reflect the sharp rise in business investment in computers, says economist Charles Lieberman of Chemical Securities Inc. The reason: Huge increases in computing power are translated by government statisticians into hefty rises in real output.

Not only are the prices of computers falling sharply, says Lieberman, but their computing power has been growing geometrically. Thus, a computer bought today that costs half what it did five years ago and has twice the computing ability is counted by the government as a fourfold increase in investment. Yet its production may have actually required fewer workers.

Purchases of computer equipment accounted for more than 20% of last year's economic growth, although such products made up only 3% of GDP. "And computer makers have been firing workers, not hiring them," says Lieberman.

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