ECONOMIC UPDATE….Productivity figures dropped precipitously last year, but the team at Goldman Sachs says they can explain it:

We believe there is a straightforward explanation for slower productivity growth — the housing downturn. The sharp drop in homebuilding activity has not yet led to a significant decline in employment, so productivity in this sector is falling rapidly. Productivity growth in the rest of the nonfarm sector remains at a healthy 2.5 percent pace.

Well, look: anytime any aggregate growth figure is low you can always point to its weakest component and say that things look a lot better if you just exclude it. A couple of years from now it will be something different: “Sure, there’s a slowdown in the IT sector, but it’s temporary and the rest of the economy is growing at a nice clip.” This kind of analysis leaves me pretty cold.

In any case, the Goldman Sachs guys say this will all be taken care of as soon as the housing industry improves its productivity by firing a bunch of people, which sounds like good news for statisticians but not so good for the rest of us. Then, for reasons that aren’t clear to me, Dan Drezner suggests that this might presage an era of low productivity growth but high wage growth — just the opposite of what’s been going on for the past few years. Huh? Even Dan admits that this seems unlikely:

Profit margins have been sufficiently high to allow this to happen — though I confess I fail to see why firms would have an economic incentive to act in this fashion.

I fail to see it too, and sure enough, the BLS reported anemic wage growth this quarter. Kash has more on this over at his place.

A couple of days ago Kash also posted a brief look at U.S. consumption growth, which is by far the biggest driver of the economy, and concluded that it was hard to see where future growth was going to come from. Labor income is close to stagnant, credit cards are maxed out, and houses can no longer be used as ATMs.

I dunno. Maybe I’m just in a pessimistic mood lately, but this strikes me as pretty much correct. The middle class can’t keep borrowing forever, and the rich can’t keep the economy afloat all by themselves. So what happens now?