Falling worker productivity statistics after 18 months of gains could possibly be an optimistic development for job creation and economic recovery. Companies that slashed payrolls during the recession are raking in profits by getting more output from less workers. But the work force may be reaching its limit based on the latest Labor Department report. If that is the case, United States of America companies may have to engage in job creation to maintain growth and boost the flagging economic recovery.
[b]Worker productivity in an upside down economy[/b]
Worker productivity posted large gains throughout 2009, but the Labor Department said Tuesday it declined at an annual rate of .9 percent within the April-to-June quarter. The Associated Press reports that Americas worker productivity is the key ingredient to boosting living standards. The increased production resulting from higher efficiency allows companies to increase wages without increasing prices . In normal times, falling efficiency would be a warning sign for the United States of America economy. Nevertheless, many economists think that high unemployment rate will eventually hurt companies 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. Those businesses benefit from more demand for their products.
[b]Workers sacrificed for corporate earnings[/b]
For corporations banking that output would continue to climb without hiring new workers, CNN reports that the new Labor Department report is a wake-up call. Companies did more with less during the worst of the recession. But in 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 businesses probably "overdid it" with layoffs during the recession. Even if it's just to keep employee morale up, he said, businesses may have to hire more to stay away from burning out workers.
[b]Job creation a must to prevent deflation[/b]
Beharvesh told CNN that within the next few months, job development will likely remain weak. He expressed longer-term optimism, nevertheless, saying the private sector could start adding 100,000 jobs a month by year-end and maybe 150,000 by mid-2011. At the opposite end of the spectrum is a report from ABC News, which said that dropping productivity is just one more sign the economic recovery is in danger of heading south. Within the second quarter, the overall economy grew at an annual rate of just 2.4 percent, slipping from 3.7 percent within 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.
[b]Further reading[/b]
Google
google.com/hostednews/ap/article/ALeqM5gNiyJ905Ho0Ur96V2TQhsBX19lGwD9HGMHAO0
CNN
money.cnn.com/2010/08/10/markets/thebuzz/
ABC News
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