Drop In Worker Efficiency Could Lead To Job Generation
Job generation and job recovery could get a shot in the arm from a decrease in worker productivity. Companies that slashed payrolls during the recession are raking in profits by getting more output from less workers. But the latest report from the Labor Department on worker productivity may indicate that employees have reached their limit. If that proves to be true, corporations may have to start creating jobs to drive the economic recovery they need to keep growing.
A new meaning for falling worker productivity
Worker productivity declined at an annual rate of .9 percent in the April-to-June quarter after posting large gains throughout 2009, the Labor Department said Tuesday. Worker productivity is a primary factor in improving the standard of living, according to the Associated Press. The increased production resulting from higher productiveness allows companies to increase wages without increasing prices . In normal times, falling productivity would be a warning sign for the United States economy. But economists believe the unemployment rate has become a threat to the corporations that are slashing their work forces. Increased hiring will create the jobs consumers need to increase spending, which accounts for 70 percent of the United States of America economy. Those businesses benefit from more demand for their products.
Workers with jobs working harder
For companies banking that output would continue to climb without hiring new workers, CNN reports the new Labor Department report is a wake-up call. At its worst, companies 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 businesses probably “overdid it” with layoffs during the recession. Even if it is just to keep employee morale up, he said, companies may have to hire more to stay away from burning out workers.
Job creation critical to stay away from deflation
For the next few months, Behravesh said, job generation will probably remain low. 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 productivity is just one more sign that 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 nevertheless working and prices will follow suit, possibly triggering a vicious cycle of deflation.
Â
Further reading
google.com/hostednews/ap/article/ALeqM5gNiyJ905Ho0Ur96V2TQhsBX19lGwD9HGMHAO0
CNN
money.cnn.com/2010/08/10/markets/thebuzz/
ABC News
