Falling worker efficiency statistics after 18 months of gains might be a positive development for job creation and economic recovery. By getting more output from fewer workers, businesses that laid off workers during the recession have been increasing their earnings. But the work force may be reaching its limit depending on the latest Labor Department report. If that proves to be true, businesses could have to start creating jobs to drive the economic recovery they have to keep growing.
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. Worker productivity is a primary factor in improving the standard of living, as outlined by the Associated Press. Rising productivity leads to higher wages and increased production without raising prices . In most cases a slip in productivity would be a troubling sign for the United States economy. But economists believe the unemployment rate has become a threat to the companies that are slashing their work forces. 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. Ultimately, that leads to more customers for those businesses.
Businesses profit from overworked employees
For corporations that may have believed the United States had entered a period where output could keep climbing without bringing people back to work, CNN reports that the latest worker productivity numbers are a dose of reality. At its worst, companies did more with less during the recession. But economic output was outstripped by hours worked in the report from the Labor Department. Within the CNN article, Nariman Behravesh of IHS Global Insight in Lexington, Mass. said corporations probably “overdid it” with layoffs during the recession. He said that if for no other reason than keeping employee morale up, businesses may have to hire more to keep away from worker burnout.
Deflation fears underscore need for job creation
Job creation is likely to remain weak for the next few months, Behravesh told CNN. However, he’s optimistic that more than 100,000 jobs a month could start materializing within the private sector by the end of the year and possibly 150,000 jobs monthly mid-2011. But ABC News reports that weak productivity is in line with other signs that Americas economic recovery is losing momentum. The overall economy grew at only a 2.4 percent annual rate within the second quarter, down from a 3.7 percent rate in the first quarter. 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.
Further reading
google.com/hostednews/ap/article/ALeqM5gNiyJ905Ho0Ur96V2TQhsBX19lGwD9HGMHAO0
CNN
money.cnn.com/2010/08/10/markets/thebuzz/
ABC News
No comments:
Post a Comment