However, the facts show that investors will tend to take profits in the winner far sooner than they'll incur losses in the loser, presumably because they'd like to avoid feelings of regret. A similar problem with assuming excessive rationality dogged the popular misinterpretation of last week's productivity estimates. The New York Times echoed a similar view. But the news wasn't nearly as momentous as all that. In fact, it was pretty much what we all should've expected.
Productivity is measured as output per worker-hour.
For when it comes to hiring and firing in response to fluctuations in output growth, business in general is perennially behind the curve. So productivity growth is bound to overshoot in boom times, since output will be growing at a much faster rate than hours worked. Similarly, it will tend to undershoot when times go bad, since hours worked will be growing at a faster rate than output. And what's really noteworthy is that productivity has not shrunk significantly for even one quarter, despite the sharp slowing in output growth. This remarkable performance testifies to the pickup in the productivity's underlying trend, not to any long-term weakness.