Drop in worker efficiency may lead to job development

A drop in worker productivity for the first time in 18 months is actually good news for the struggling United States economy and high unemployment rate. By getting more output from fewer workers, corporations that laid off workers during the recession have been increasing their earnings. But the work force may be reaching its limit based on the latest Labor Department report. If that proves to be true, companies could have to start creating jobs to drive the economic recovery they have to keep growing.Article Source:Worker productivity in an upside down economy

Worker productivity in an upside down economy

Worker productivity declined at an annual rate of .9 percent within the April-to-June quarter after posting large gains throughout 2009, the Labor Department said Tuesday. As outlined by the Associated Press, worker productivity is a key driver for improved living standards. The increased production resulting from higher efficiency allows corporations to increase wages without increasing prices . In most cases a slip in productivity would be a troubling sign for the U.S. economy. Nevertheless, numerous economists think that high unemployment rate will eventually hurt companies that have prospered by laying off workers. If they start hiring, the job creation will give households the income boost they have to increase consumer spending, which accounts for 70 percent of economic activity. And that would ultimately lead to more demand for those companies' products.

Companies profit from overworked employees

For companies that may have believed the United States of America had entered a period where output could keep climbing without bringing people back to work, CNN reports that the latest worker efficiency numbers are a dose of reality. During the worst of the recession, and businesses learned how to get more with less. However, the amount of hours worked rose faster than output within the Labor Department report. Businesses probably "overdid it" with layoffs during the recession, said Nariman Behravesh of IHS Global Insight in Lexington, Mass. In the CNN article. Companies may have to hire more to stay away from worker burnout, he said, if for no other reason than keeping employee morale up.

Job creation needed to thwart deflation

Job creation is likely to remain weak for the next few months, Behravesh told CNN. 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 productiveness is just one more sign that the economic recovery is in danger of heading south. The overall economy grew at only a 2.4 percent annual rate within the second quarter, down from a 3.7 percent rate within the first quarter. with the unemployment rate mired at 9.5 percent, officials at the Federal Reserve are concerned that companies will see the high unemployment rate as an opportunity to push wages down for individuals who still have jobs, which could start a debilitating cycle of deflation.

More on this topic

Google

google.com/hostednews/ap/article/ALeqM5gNiyJ905Ho0Ur96V2TQhsBX19lGwD9HGMHAO0

CNN

money.cnn.com/2010/08/10/markets/thebuzz/

ABC News