US worker productivity rose at a faster-than-forecast pace in the July-September quarter, another positive sign that the economy is experiencing a broad recovery -- one that could lead to wage increases for workers.

Productivity, or the US economy's output per hour of work, increased at a 2.0 percent annual rate during the third quarter as output increased 4.4 percent and hours worked increased 2.3 percent, the US Bureau of Labor Statistics reported Thursday. 

Higher productivity is a sign of economic growth that often leads to higher wages for employees and increased profits for companies. But it can also trigger inflation. The Commerce Department said last week that the price index for personal consumption expenditures rose 1.4 percent in September from a year earlier. That puts inflation still below the Fed's 2 percent target. A figure above 2 percent would trigger the Fed to take action against rising inflation by hiking interest rates.

"The numbers are projecting that the US economy can grow without the threat of inflation. I think that's very key," said Peter Cardillo, chief market economist at Rockwell Global Capital.

Although the Bureau of Labor Statistics' preliminary 2 percent reading on productivity rose more than forecast, the pace of growth during the July-September period was slower than the previous quarter's revised 2.9 percent annual rate. Analysts had expected productivity to rise 1.5 percent in the third quarter, according to Reuters data.

Next up for economists is Fridays Labor Department monthly jobs report for October. The report is expected to show US employers added 235,000 jobs in October, compared with 248,000 in September. Economists expect the unemployment rate to remain unchanged at 5.9 percent.

With the global economy deteriorating quite quickly, in its CEOs words, Rolls-Royce Holdings has issued a new set of warnings on sales and profits.
Rolls-Royce Holdings PLC

A few years ago, a number of prominent Italian seismologists were subject to public opprobrium for having failed to predict an earthquake in the Italian town of LAquila despite a series of very clear early warning tremors. One has to wonder whether something similar is not happening today in European policymaking circles concerning the eurozone economy. Since despite an ever-increasing series of early warning signals that the eurozone might be heading soon for another round of its sovereign debt crisis, European policymakers are making little change to their policy approach to avert a major debt crisis that could lead to the eventual unraveling of the euro.

Among Europes most recent economic tremors has been the growing evidence that the German economic recovery has now run out of steam. Indeed, the most recent German economic data would suggest that the eurozones economic locomotive is now likely to have succumbed to a triple-dip economic recession in the third quarter of 2014. Should Germany in fact experience another recession, there is little prospect that the rest of Europe will manage to get itself out of its present economic funk since it is so dependent on a healthy Germany for its exports.

What should the government do vs. not do? Where to draw the line is the source of vigorous debate and elections serve to resolve those differences in opinion. However, most Americans, irrespective of their political stripe, accord the federal government the essential duty of protecting its citizens. And, regardless of the disagreement about how to protect them, the appropriateness of this role is indisputable.

The events of September 11, 2001 highlighted this responsibility for many Americans. I was working in the White House at the time and vividly recall the pressure to rethink all of national security, domestic, international affairs and economic policies in terms of a post-9/11 world. Among the most immediate was the need to do a better job of securing our travel system. Enhanced security procedures in airports, heightened scrutiny of visa processing and strengthened travel infrastructure became essential.

Unfortunately, everything comes at a price. These measures made traveling safer--but not easier or cheaper. Both had negative fallout on the travel economy and the global perception of the United States.

The Economics Of Travel

The economics of travel is no small matter. Tourism added nearly $300 billion to the economy in 2000. After 9/11, this value dropped and took years to recover both in sheer dollar terms and relative to the size of the US economy. Many factors contributed to this decline, but the new and (at times) onerous post-9/11 security environment is a prominent one.

Fortunately, there was an opportunity for the government to mitigate the undue burdens on the travel economy while simultaneously repairing the image of the US around the globe through a travel promotion strategy.

A Public-Private Partnership

Historically, federal interest in travel promotion has waxed and waned since 1961. In the post-9/11 environment its heightened importance was recognized and a strategy was authorized after a 5-year hiatus. Enacted in 2010, this travel promotion regime now merits reauthorization.

The policy design is as important as the underlying policy rationale for travel promotion. The US approach is a public-private partnership: Brand USA is a model for the type of federal policy that can be used to appropriately mitigate burdens imposed by other federal policies on certain sectors of the economy. Unlike the travel promotion agencies of many of nations, Brand USA takes no taxpayer funding. Rather, Brand USA has a direct financing mechanism through visa fees paid by foreign visitors and through travel industry stakeholders. The private sector drives the decisions on how best to display America's attractiveness around the globe and to encourage visitors to travel to the US

Protecting Americans at home is a central federal responsibility. But it can be done in a way that balances economic and international affairs interests. The Brand USA initiative rebalances the stress on the travel economy, improves the image of America abroad--and does so in a way that protects the US taxpayer.