Productivity Drop Could Indicate Hiring Increase in the Near Future…
Andover, Massachusetts August 10th, 2010 – With all the recent disappointing news from the Labor Department the economy has been waiting for any kind of good news. Today the labor department released its quarterly productivity report for the US economy and the news gave hope of an increase in hiring in the near future. Employee productivity dropped for the first time since 2008 by .9% between April and June. What does this mean in the bigger picture?
For the past two years employers have been cutting jobs almost every month trying to shed costs to stay competitive in a global market or in some cases just to survive. This has led to a historically large increase in labor productivity as workers were asked to do more with less help. In 2009 alone the productivity of US workers rose by 3.5%. Work that used to be done by 3 workers was being consolidated into 1 to save labor costs and increase the profitability of the company. This is why Wall Street has been seeing record profits and huge profit margins while Main Street has been suffering under high unemployment and low wage growth. While this is great news for companies there are limits to how much each worker can accomplish. At a certain level productivity will not increase and companies will be forced to hire more workers so that they can continue to expand and meet their customers’ needs.
Today’s drop indicates that companies have finally reached the point where their employees are being asked to do too much. The average work week has increased along with productivity over the last two years to a recent high of over 35 hours. Typically a drop in productivity would harm our economy as our goods would become more expensive on the open market as labor costs increase. However, this drop could indicate that firms are nearing the point where hiring will be necessary to grow. If this is the case the US economy can expect to start adding workers again that have been shed to the count of over 8 million in the past 2 years. An increase in hiring would lead to more income being generated by workers which they can then begin spending again. More openings will also lead to higher wages as companies will be fighting to get rehire the best of the unemployed. As has been mentioned many times before, the key to an economic recovery is jobs. If Americans are secure with their employment they will return to spending at pre recession levels. This would mark the final end to the recession and a return to growth for the US economy as consumer spending account for over 70% of our countries GDP.
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Readers, is this the news we have been waiting for or just a temporary drop? Have you been asked to take over tasks at work that used to be done by someone else?
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