Worker productiveness decline could lead to job development

A decrease in worker productiveness for the first time in 18 months is really good news for the struggling America's economy and high unemployment rate. Corporations have enjoyed fat balance sheets by getting more from less after slashing payrolls during the recession. But the latest round of worker productivity statistics from the Labor Department shows that staffs are stretched too thin. If that proves to be true, corporations could have to start creating jobs to drive the economic recovery they need to keep growing

Decline in worker productivity gets new meaning

Worker productivity posted large gains throughout 2009, but the Labor Department said Tuesday it declined at an annual rate of .9 percent within the April-to-June quarter. As outlined by the Associated Press, worker productivity 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 . Decreasing productivity would be a negative for the United States of America economy in normal times. Nevertheless, numerous economists think that high unemployment rate will eventually hurt businesses that have prospered by laying off workers. Increased hiring will create the jobs consumers have to increase spending, which accounts for 70 percent of the U.S. economy. Those businesses benefit from more demand for their products.

Workers with jobs working harder

The latest worker productiveness numbers are a rude awakening, CNN reports, for corporations that may have believed the U.S. had entered a period where output could keep climbing without bringing individuals back to work. At its worst, businesses did more with less during the recession. But in 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. In the CNN article. Businesses may have to hire more to avoid worker burnout, he said, if for no other reason than keeping employee morale up.

Job creation critical to avoid deflation

Beharvesh told CNN that in the next few months, job generation will likely remain weak. But he's optimistic 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. At the opposite end of the spectrum is a report from ABC News, which said that dropping productiveness is just one more sign the economic recovery is in danger of heading south. In 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 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.

Additional reading

Google

google.com/hostednews/ap/article/ALeqM5gNiyJ905Ho0Ur96V2TQhsBX19lGwD9HGMHAO0

CNN

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

ABC News