Tech lift to productivity overlooked? The Fed doesn't think so

Tue Aug 4, 2015 2:33am EDT
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By Ann Saphir

SAN FRANCISCO(Reuters) - Steve Gutmann used to have a basement that he never used. His Honda Civic sat idle in front of his Portland, Ore. house. 

Now strangers use to book Gutmann’s $6-an-hour car for errands and travelers stay in his newly refurbished basement apartment, listed at $115 a night on AirBnb. Gutmann and a business partner are developing a new app that lets people get more use out of their possessions.

The apps mean "pretty significant productivity gains for a full range of things, from empty rooms to idle cars and bikes and all the other things that are marooned in people's garages," Gutmann says.

That "sharing economy" has lured billions of dollars from investors, yet so far, it barely seems to register in U.S. economic data.

Productivity - an area of the economy particularly sensitive to technological advances - has grown at just 1.25 percent a year since the 2008-2009 crisis, half its pre-crisis average.

The decline has some economists arguing that official figures are simply failing to capture the effects of the sharing economy and other innovation, and that true productivity growth is much higher.

If that is the case, then the Federal Reserve should feel more comfortable raising its interest rates for the first time in almost a decade.

But here is the catch: better productivity also lowers business costs.   Continued...

A woman points to a job listing on an employment website at her residence in Sewell, New Jersey, July 7, 2011.   REUTERS/Tim Shaffer