Falling worker productiveness statistics after 18 months of gains could possibly be a positive development for job development and economic recovery. Businesses have loved fat balance sheets by getting more from less after slashing payrolls during the recession. But the latest round of worker productiveness statistics from the Labor Department shows that staffs are stretched too thin. If that is the case, U.S. corporations may have to engage in job creation to maintain growth and boost the flagging economic recovery.
A new meaning for falling worker productivity
. Worker efficiency is a primary factor in improving the standard of living, according to the Associated Press. It allows companies to pay workers more because of increased production without raising the cost of goods . Decreasing productiveness would be a negative for the U.S. economy in normal times. But in this economy, some analysts say that companies profiting from job cuts will eventually be hurt by the high unemployment rate. If they start hiring, the job creation will give households the income boost they need to increase consumer spending, which accounts for 70 percent of economic activity. And that would ultimately lead to more demand for those companies’ products.
Businesses profit from overworked employees
The latest worker productiveness 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. During the worst of the recession, and companies learned how to get more with less. But within the latest Labor Department report, the amount of hours worked rose at a faster pace than actual economic output. Corporations probably “overdid it” with layoffs during the recession, said Nariman Behravesh of IHS Global Insight in Lexington, Mass. In the CNN article. Even if it’s just to keep employee morale up, he said, businesses may have to hire more to avoid burning out workers.
Job creation critical to avoid deflation
For the next few months, Behravesh said, job development will probably remain low. Nevertheless, he’s optimistic that more than 100,000 jobs a month could start materializing in the private sector by the end of the year and possibly 150,000 jobs monthly mid-2011. A report from ABC news disagrees, saying that weak productivity, along with other indicators, shows that the economic recovery is losing steam. Within the April through June period, economic growth was measured at just a 2.4 percent annual rate, down considerably from 3.7 percent from Jan. through March. Some Federal Reserve officials have expressed concern about a punishing cycle of deflation if employers view high unemployment as a chance to drive wages down for those still working.
Additional reading
google.com/hostednews/ap/article/ALeqM5gNiyJ905Ho0Ur96V2TQhsBX19lGwD9HGMHAO0
CNN
money.cnn.com/2010/08/10/markets/thebuzz/
ABC News
