Booming productivity: a reflection of overworking existing employees instead of hiring more?
Washington Post reports: Productivity Grows at 9.4 Percent Rate in Third Quarter.”
“U.S. business productivity over the summer rose to heights not seen in two decades . . . , further evidence of a buoyantly rebounding economy.”
Productivity — amount produced per employee per hour — was reported at an annualized rate of 9.4 percent, based on revised numbers.
“What is happening, many economists believe, is that businesses are watching a spurt in demand but are waiting to see if it will continue before hiring more employees. Meanwhile, they are driving their existing workforces harder to meet that demand, accounting for the productivity boost.”
“‘You can do that for only so long before you exhaust your workers,’ said Stephen Stanley, senior market economist for RBS Greenwich Capital. ‘They are going to have to start hiring. We’re seeing that in the numbers’ for employment already, he said.”
” ‘It’s pretty amazing,’ he said. ‘When firms see an initial improvement in demand, they look at it a little skeptically. They don’t want to go out and hire a lot of people if it’s just a blip . . . The best of the productivity gains are behind us,’ he said, ‘but the positive side is that businesses will probably start hiring again.’ ”
It remains to be seen how much of this productivity improvement can be sustained at the individual employer level. There may be many situations where RIF’s induced by economic pressures of the last few years have resulted not in overworked employees, but in the discovery that previously some employees were underworked and unproductive.
Obviously it will be a good thing for the economy if such newfound efficiency is preserved. But it will also be a good thing if truly overworked employees who have contributed to the productivity boom are given some relief through additional hiring, also giving relief to some of the unemployed.
