Have you tried putting out the same graph with a logarythmic Y axis?

If only unemployment was a function of average labor productivity...

P.S. I meant if only unemployment was inversely related to average labor productivity... These days, somehow, I get confused with the expected sign on this type of variables as determinants of (changes in) unemployement... %-)

Now I am looking at your previous post and I am asking myself three questions:

1. how much lag is there between IT spending and its (correctly supposed, I think) effect on labor productivity? In other words, how much longer can we ride on the previous level of IT spending growth?

2. It looks we're at 3% of trend labor productivity growth and a little less than 2% actual labor productivity growth. Which one do we think matters most for hiring decisions e.g.?

3. What's the latest consensus about how fast we think labor productivity growth should be at for the private sector unemployment rate to be steady? (Or is this a question people usually ask? Sounds like a twist on the Philips curve we should be able to have some idea about.)

Hope this actually makes some sense...

There does remain MASSIVE opportunity for improving productivity with computers.
I was in New York last week and bought tickets to broadway twice. Both times I waited in a long line where every person in the line went through the same inane ritual: "Do you have any [Orchestra/Mezzanine/Balcony] seats for [some date]. No, how about for [some other date]. OK, what's the best two seats together you have for [date]."

As a computer person, it was so obvious that what's needed is a bank of maybe four flat panel screens showing the vacant seats for the next four shows, plus maybe another two screens with touchscreens to allow choosing a show that's not in the main four. Trivial to set up. Makes the lives of people buying tickets easier. Probably allows one to get rid of one of the two ticket salespeople.

So why isn't more of this sort of thing done? One aspect is obviously tradition and lack of tech savvy on the part of the theater owners. But I think another part comes from the tech world---the old "the perfect is the enemy of the good". Rather than simply solving the particular problem I describe, something that can be done with limited hardware and maybe a week of coding or less, I suspect any tech consultant immediately gets starry-eyed with grander ideas. "Why not also allow the ability for users to books their tickets at the terminal? Heck, why not also allow them to book the tickets at home and avoid whatever fees are charged by Ticketmaster and such? And then of course you need a web site, and you'll want a way for people to leave comments about shows ...". All fine ideas, all of which lead to a vastly more expensive and complicated solution.

The initial burst of computer productivity was small focussed uses of the machines, one machine to one use. Now that we have machines that can do so much more, along with OSs that can do so much more, computer consultants seem to feel that it's a crime to use anything less than all that power.

Changing this is, I suspect, a cultural thing, meaning it will take the feedback loop from academics realizing this is a problem to advising a few generations of students before this mentality is purged. A shame.

I aggree with your main point Maynard, there is certainly so shortage of productivity enhancing realtively cheap investment that can be undertaken out there. I'm not sure what margin IT companies would do on otherwise useful suggestions like that, however. You're the pro.

Back to my point. I think I have just identified one of my blind spots. In a situation characterized by deflation, productivity growth does not necessarily help with job creation. In usual time, it gives more room for maneuvre to the Fed. But in times of deflation, it creates ever expending excess capacity and redundant labor.

If the chicken is consumer spending and the egg is investment spending, which one is supposed to come first? In other words, which one are we supposed to boost when you're at the edge of a deflationary trap? My hunch is consumption in the short-run but investment as far as the trend is concerned. An other blind spot of mine...

The falling prices for computing power also seems to show how competitive the industry is. Like the internet, pricing power is low and productivity gains are largely consumer gains.