In September 2010 the US economy lost 52,000 jobs, according to the Bureau of Labor Statistics report released on the first Friday of the following month. Why is that important? Because September 2010 was the last month in which we had negative job creation. Ever since – and periodic breathless exhortations of imminent jobs-killing Armageddon to the contrary – the economy has registered net positive jobs creation each and every month. The period from October 2010 to April 2016 is, in fact, the longest uninterrupted period of jobs creation since the end of the Second World War.

One Month Giveth, One Month Taketh Away

It is important to keep this long-term context in mind when mulling over the particular details of a monthly BLS report. Always remember that what is reported in any given month is not a fixed number, but a statistical best guess within what can be a fairly wide margin of error. Investors fixate on each month’s number in relation to the consensus expectation ahead of the release, but it is much more useful to pay attention to multi-period trends.

With that caveat in mind, the headline numbers in today’s report were a bit disappointing, with payroll gains of 160,000 against expectations of 200,000, along with downward revisions to the March and February gains. The unemployment rate held steady at 5 percent. Other BLS takeaways including the long-term jobless number and involuntary part-time workers were little changed.

The bright spot was wages. Average hourly wage gains of eight cents from the previous month translate to year-on-year growth of 2.5 percent. That’s a brisker pace than any of the main price inflation indicators; both the headline Consumer Price Index and the Fed’s favorite Personal Consumption Expenditure indicator are below two percent while core CPI, excluding energy and food prices, is 2.2 percent at last read. This month’s wage gains suggest that overall price trends are heading north. Janet Yellen has been somewhat dismissive of recent data in her public comments, but the Fed will have to take the current cadence of inflation into account as they weigh policy options ahead of the June FOMC meeting. Given the market’s expectations for zero interest rate action in June, there could be potential surprises in store.

What Are All the Workers Doing?

While it’s nice to see more people going to work and getting inflation-beating pay raises, we still don’t have a good answer to the question of why their hours of toil are not adding more to economic growth. Once every quarter we have a Productivity Wednesday preceding Jobs Friday, and this week was the appointed Wednesday for Q1 results. They were unimpressive, continuing a longstanding spell of weak productivity relative to historical norms. For the first quarter of 2016 productivity declined by one percent (annualized), following a 1.7 percent decline for the fourth quarter of 2015. The average gain for the last decade remains below one percent, far weaker than the 2.3 percent average for the post-Second World War period.

Productivity matters a great deal to our economic well-being; its chronic absence was the dominant theme of our annual market outlook back in January. Simply put, an economy only grows if (a) the population of working citizens grows or (b) each worker produces more output for each hour worked than he or she did for the previous period. Absent either of these two things happening, the economy won’t grow. With the population growth rate in long-term decline, productivity growth is the only game in town. Economists have not yet been able to solve the puzzle of why all the technological advancements of the last 15-odd years have not materialized into tangible growth. Perhaps, opine some, we are simply in a lull between innovation and commercial realization.

Then again perhaps we are, as Robert Gordon argues in his fascinating recent book “The Rise and Fall of American Growth,” past the peak of secular economic growth and unlikely to see it again in our lifetimes. Gordon’s argument is that the two most important inventions of the last 150 years – electricity and the internal combustion engine – have already contributed the lion’s share of the average annual growth we enjoyed from the last two decades of the 19th century on. The current productivity trend gives some weight to Gordon’s arguments.

We do not agree with Gordon’s view that nothing will ever rise to the same level of importance as those two 19th century inventions; the nature of any paradigm shift that radical is that it cannot even be imagined before it happens. More prosaically, though, we would like to see more bounce in forthcoming Productivity Wednesdays. Month after month of job creation is nice, but it won’t last forever unless all those new positions do more to improve overall economic output.

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