Cyrillic Partners

Nonfarm productivity increased at an annual rate of 4.9% in the third quarter, according to the Labor Department and covered in various news outlets. The growth outpaced the 3.3% gain economists had predicted.

So that’s a good thing for employers. Unit labor costs fell at an annual rate of 0.2% during the third quarter. (Namaste to Shannon Burns of Shannonburns.com for the cartoon.)

But it’s even better news for the Fed. A productivity increase means that the economy can grow without inflation. This good report may be the only thing that Ben Bernanke has as good news this week. The banks are still dealing with the credit crisis and oil is starting to nudge $100 a barrel. (Of course it’s still cheaper than Dasani bottled water. It sells for an average price of $1.12 per 20-ounce bottle at WalMart, according to the Container Recycling Institute. There are 3968 ounces in a barrel. Which translates out to $222.2 per barrel of Dasani. There is of course a bottle cost coming into play here.)

High oil prices used to mean recession for the U.S. economy. But there hasn’t been the type of economic hit one might expect from the ever-increasing oil prices. Why? My guess is that more-efficient cars play a role. But even more importantly, the U.S. economy has moved further away from a industrial society and toward an information and services-based economy. Don’t need oil to set that economy humming.

So although the high oil prices are grabbing headlines, I’m not sure it’s something Bernanke will have to lose sleep over.

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