Job generation and job recovery could get a shot in the arm from a drop in worker productivity. Companies that slashed payrolls during the recession have been raking in profits by getting more output from less workers. But the work force may be reaching its limit depending on the latest Labor Department report. If that is the case, U.S. businesses could have to engage in job generation 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. As outlined by the Associated Press, worker productiveness is a key driver for improved living standards. It allows companies 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 businesses that have prospered by laying off workers. Increased hiring will create the jobs consumers have to increase spending, which accounts for 70 percent of the United States of America economy. Ultimately, that leads to more customers for those companies.
Workers reaching their limit
For corporations that may have believed the U.S. had entered a period where output could keep climbing without bringing individuals back to work, CNN reports the latest worker productiveness numbers are a dose of reality. Companies did more with less during the worst of the recession. But economic output was outstripped by hours worked in the report from the Labor Department. Within the CNN article, Nariman Behravesh of IHS Global Insight in Lexington, Mass. said businesses probably “overdid it” with layoffs during the recession. Businesses may have to hire more to avoid worker burnout, he said, if for no other reason than keeping employee morale up.
Deflation could be price of high unemployment
Beharvesh told CNN that within the next few months, job creation 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 efficiency is just one more sign that the economic recovery is in danger of heading south. The overall economy grew at only a 2.4 percent annual rate in the second quarter, down from a 3.7 percent rate within the first quarter. with the unemployment rate mired at 9.5 percent, officials at the Federal Reserve are concerned that companies will see the high unemployment rate as an possibility to push wages down for those who still have jobs, which could start a debilitating cycle of deflation.
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google.com/hostednews/ap/article/ALeqM5gNiyJ905Ho0Ur96V2TQhsBX19lGwD9HGMHAO0
CNN
money.cnn.com/2010/08/10/markets/thebuzz/
ABC News
