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 businesses that may have believed the United States had entered a period where output could keep climbing without bringing individuals back to work, CNN reports the latest worker efficiency numbers are a dose of reality. During the worst of the recession, and businesses learned how to get more with less. Nevertheless, the amount of hours worked rose faster than output within the Labor Department report. In the CNN article, Nariman Behravesh of IHS Global Insight in Lexington, Mass. said businesses probably “overdid it” with layoffs during the recession. He said that if for no other reason than keeping employee morale up, companies may have to hire more to keep away from worker burnout.
Job creation needed to thwart deflation
Job creation is likely to remain weak for the next few months, Behravesh told CNN. But he’s optimistic 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 the economic recovery is in danger of heading south. . 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 opportunity to push wages down for those who nevertheless 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
