NEW YORK (CNN/Money) -
Corporate chieftains have become well-versed in the art of managing expectations. Don't let investors know how well things are going, and you'll get a nice boost when results "surprise" to the upside.
So it was a little weird to see a former CEO, Treasury Secretary John Snow, predict in an interview with London's Times that the U.S. economy would generate two million jobs from the third quarter of this year to the third quarter next year.
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 Justin Lahart, senior writer at CNN/Money, talks about what would it take to hit Treasury Secretary John Snow's job target.
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This exceeds even the most optimistic economists' predictions and it left Wall Streeters grumbling that Snow had oversold his case. To hit Snow's job target, they say, the economy would have to grow in excess of 4 percent over the next year.
And even if this growth goal gets hit (which is certainly a possibility given that the consensus is calling for GDP growth of 3.9 percent in 2004), productivity growth, which ran at a 7.2 percent clip in the second quarter would have to slow markedly -- 2.5 percent or less is what Goldman Sachs economists are guessing.
Why? Productivity measures how much it costs to make what economists call "a unit of output" -- what we might call, in technical terms, a widget. When productivity is swelling, it means that the costs associated with making widgets are falling relative to what widgets are going for in the open market. In other words, the widget-maker's profit margins are expanding.
The widget-maker's major cost is paying for its workers' salary and benefits. So when you see the widget-maker's productivity go up (or margins expand) it means that it's getting more output from its workers than before. Maybe it's the computers, maybe it's the new coffee machine, maybe it's because the widget-maker cut its workforce down to the bone and the ones that are left are scared of losing their jobs.
So for the Treasury Secretary's jobs forecast to come true, companies are going to have to stop working so hard to grow their profit margins. Given that they still aren't very far out of investors' doghouse, how likely is that?
Still, audacious as the idea of the economy picking up two million jobs over the next year seems, it's not without precedent. Coming out of the last recession, the economy was slow to generate jobs, but once the jobs came, they came fast and furious. In 1993, two years away from the recession's 1991 trough, 2.8 million jobs were added. The equivalent in today's expanded workforce would be about 3.2 million jobs. And productivity growth fell sharply that year, coming in at just 0.4 percent, compared with more than 3 percent the year before.
So yes, the Treasury Secretary made a gamble. But that doesn't mean it can't pay off.
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