Falling worker productivity statistics after 18 months of gains might be a positive development for job creation and economic recovery. Businesses have enjoyed fat balance sheets by getting more from less after slashing payrolls during the recession. But the latest round of worker efficiency statistics from the Labor Department shows that staffs are stretched too thin. If that is the case, Americas businesses may have to engage in job creation to maintain growth and boost the flagging economic recovery.
When declining worker productivity is good news
Worker productivity posted large gains throughout 2009, but the Labor Department said Tuesday it declined at an annual rate of .9 percent in the April-to-June quarter. The Associated Press reports that United States worker productivity is the key ingredient to boosting living standards. It allows businesses to pay workers more because of increased production without raising the cost of goods . In most cases a slip in productivity would be a troubling sign for the U.S. economy. However, many economists think that high unemployment rate will eventually hurt corporations that have prospered by laying off workers. Because consumer spending accounts for 70 percent of the economy, hiring will create the jobs families need to go shopping. Ultimately, that leads to more customers for those companies.
Corporations profit from overworked employees
The latest worker numbers are a rude awakening, CNN reports, for businesses that may have believed the Americas had entered a period where output could keep climbing without bringing individuals back to work. At its worst, corporations did more with less during the recession. But within the latest Labor Department report, the amount of hours worked rose at a faster pace than actual economic output. Nariman Behravesh of IHS Global Insight in Lexington, Mass., told CNN that companies probably “overdid it” with layoffs during the recession. Even if it is just to keep employee morale up, he said, businesses may have to hire more to keep away from burning out workers.
Job creation critical to avoid deflation
Beharvesh told CNN that within the next few months, job development will likely remain weak. But he’s optimistic that that the private sector may be adding over 100,000 jobs a month by the end of this year and 150,000 jobs a month by the middle of 2011. At the opposite end of the spectrum is a report from ABC News, which said that dropping productiveness is just one more sign the economic recovery is in danger of heading south. In the second quarter, the overall economy grew at an annual rate of just 2.4 percent, slipping from 3.7 percent in the first quarter. Some Federal Reserve officials worry that with the unemployment rate stuck at 9.5 percent, employers will seize the chance to push wages down for those still working and prices will follow suit, possibly triggering a vicious cycle of deflation.
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google.com/hostednews/ap/article/ALeqM5gNiyJ905Ho0Ur96V2TQhsBX19lGwD9HGMHAO0
CNN
money.cnn.com/2010/08/10/markets/thebuzz/
ABC News
