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 productiveness is a primary factor in improving the standard of living, as outlined by the Associated Press. It allows businesses to pay workers more because of increased production without raising the cost of goods . In normal times, falling efficiency would be a warning sign for the U.S. economy. But in this economy, some analysts say that corporations profiting from job cuts will eventually be hurt by the high unemployment rate. Increased hiring will create the jobs consumers need to increase spending, which accounts for 70 percent of the United States of America economy. Those companies benefit from more demand for their products.
Workers with jobs working harder
For companies 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 efficiency numbers are a dose of reality. Companies did more with less during the worst of the recession. However, the amount of hours worked rose faster than output in the Labor Department report. Within the CNN article, Nariman Behravesh of IHS Global Insight in Lexington, Mass. said companies 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 avoid worker burnout.
Job creation critical to stay away from deflation
For the next few months, Behravesh said, job development will probably remain low. However, 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 efficiency, along with other indicators, shows the economic recovery is losing steam. 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.
Further reading
google.com/hostednews/ap/article/ALeqM5gNiyJ905Ho0Ur96V2TQhsBX19lGwD9HGMHAO0
CNN
money.cnn.com/2010/08/10/markets/thebuzz/
ABC News
