A decrease in worker productiveness for the first time in 18 months is actually good news for the struggling U.S. economy and high unemployment rate. By getting more output from fewer workers, businesses that laid off workers during the recession have been increasing their earnings. But the latest report from the Labor Department on worker productivity may indicate that employees have reached their limit. Businesses will have to start hiring to maintain growth and revive economic recovery if that turns out to be true. Article resource - Decline in worker productivity may be good for economic recovery by Personal Money Store.
Decline in worker productivity gets new meaning
After posting large gains in 2009, the Labor Department said that worker productivity declined at an annual rate of .9 percent within the second quarter. As outlined by the Associated Press, worker efficiency is a key driver for improved living standards. It allows businesses to pay workers more because of increased production without raising the cost of goods . In most cases a slip in productivity would be a troubling sign for the U.S. economy. But economists believe the unemployment rate has become a threat to the corporations that are slashing their work forces. Because consumer spending accounts for 70 percent of the economy, hiring will create the jobs families need to go shopping. And that would ultimately lead to more demand for those companies' products.
Workers reaching their limit
The latest worker productivity numbers are a rude awakening, CNN reports, for businesses that may have believed the United States had entered a period where output could keep climbing without bringing people back to work. 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. Corporations probably "overdid it" with layoffs during the recession, said Nariman Behravesh of IHS Global Insight in Lexington, Mass. Within the CNN article. Even if it's just to keep employee morale up, he said, corporations may have to hire more to stay away from burning out workers.
Deflation could possibly be price of high unemployment
Beharvesh told CNN that in the next few months, job generation will likely remain weak. 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. But ABC News reports that weak productivity is in line with other signs that Americas economic recovery is losing momentum. 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.