The big story with today's GDP report is with the revisions to prior year's data. GDP growth for both 2005 and 2006 was revised down slightly. The signifiance of this is that it lowers productivity growth. With the revised data, productivity growth has averaged just 1.5 percent from the 2nd quarter of 2004 through the 2nd quarter of 2007. This is the same rate of productivity growth as we had during the long slowdown from 1973-1995. With three full years of weak productivity growth, there is reason to question whether productivity is again on the slow track. The other noteworthy revision is a large downward revision to proifts for 2006. As a result, the increase in the profit share of corporate income from the 1997 profit peak to the 2006 peak is somewhat less than had previously been reported. The increase in profit share over this period was 0.75 percentage points. This is not trivial, but is considerably less than the rise of 1.5 percentage points between the 1988 profit peak and the 1997 peak. (Aftre-tax shares actually fell slightly between 1997 and 2006.) This means that the redistribution from wages to profits was not the main cause of wage stagnation for most workers in recent years, rather the cause was the redistribution from lower and middle income workers to those at the top, fund managers, CEOs, and doctors and lawyers.
--Dean Baker
