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Lost amid the shuffle of recent economic data points this week was one enduring trend in the U.S. economy -- and it's one that has an upside and, unfortunately a downside (at least short-term): productivity. Worker productivity continues to increase at an astounding rate: it increased an enormous 8.1% in Q3, the U.S. Labor Department announced. What's more, productivity is up about 4% in the past 12 months. The same report indicated that unit labor costs fell 2.5% in Q3 and declined 2.9% in the past year.
In other words, despite the worst recession in more than a generation, U.S. employees -- already the most productive in the world -- continue to increase output per hour worked -- an unqualified plus for U.S. businesses, and ultimately, for U.S. stocks.
Lean companies
What's driving the recent productivity gains? Recent lay-offs by companies, and technological innovation. In the lean/mean 'decade of the 00s,' companies have learned to do more with the same, or in many cases, with less staff, and technology has facilitated this process.
The downside to all of that increased productivity? You guessed it: it means fewer job openings/new hires than would occur if worker productivity were lower. So, ironically, the American workforce, as a whole, is being 'penalized' for being more productive: economists lament that it's a frustrating aspect of free markets, and it's one that's not likely to change any time soon, they quickly observe, given the increased deployment of productivity-enhancing tools. Longer-term, of course, increased productivity leads to increased, real median incomes and national wealth, and a more-efficient utilization of resources, among other benefits, which is why economists argue that short-term downsides must be endured.
Still, those short-term liabilities can be huge. What's the best way to cope with them? Economists generally agree it's the identification/creation of new sectors of job growth to create the millions of new jobs for the millions of employees who have lost their jobs and/or who are having problems finding employment, due to the aforementioned increased productivity. Those new sectors are particularly important in the United States, where, unlike in France, Germany, and many other developed economies in Europe, the social safety net is limited. Historically, the entrepreneur-oriented, innovative U.S. economy has been able to discover these new sectors of job growth -- information technology in the 1980s and 1990s is a classic example -- and provided it does again, the world's largest economy will enter a new era of expanding prosperity.
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Financial Editor Joseph Lazzaro is writing a book on the U.S. presidency and the U.S. economy.
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Reader Comments (Page 1 of 1)
12-04-2009 @ 8:17PM
garydpdx said...
Increased productivity by automation is fine but this is coming from people each doing the work of two or even three. Salaried professionals don't punch time cards so their 40 hour work week is actually 60, or 80, or even 100 hours!
12-04-2009 @ 11:06PM
Peter Van Schaik said...
Sometimes productivity gains are simply switching some of the labor to the customer. I buy quite a bit from Lowe's. I can't really remember the last time I interacted with a Lowe's employee. I go in, pick out what I need, take it through the self check-out line, bag it up and carry it to my car. On paper productivity increased but it's just an unpaid customer doing the work an employee previously did. I can do basically the same thing at the grocery store, the bank, and the gas station. Why hire employees when you can put your customer to work? http://jpetervanschaik.googlepages.com