|
According to
the conventional wisdom, data released this morning should be taken as an
encouraging sign for the labor market.
"US
Worker Productivity Growth Slowed in Q4, Which Could Signal More Hiring in
Coming Months" (Associated
Press)
U.S. companies
will have to keep hiring steadily to meet their customers’ rising
demand. That’s the message that emerged Wednesday from a report that
employers are finding it harder to squeeze more output from their existing
staff.
Worker
productivity rose at an annual rate of 0.9 percent in the October-December
quarter, the Labor Department said. While that’s a slight upward
revision from last month’s preliminary estimate, it’s half the
pace from the July-September quarter.
Productivity,
the amount of output per hour of work, grew last year at the slowest pace in
nearly a quarter of a century.
A slowdown is
bad for corporate profits. But it can be a good sign for future hiring. It
may mean that companies have reached the limits of what they can get out of
their existing work force and must add more workers if they want to grow.
That trend
already looks to be happening. A report Wednesday from ADP, a payroll
provider, estimated that companies added 216,000 workers in February. The
survey did not include government agencies, which have been cutting jobs.
A more reliable
read on hiring will come Friday when the government issues its February jobs
report. Expectations are high after two strong months of job growth in December
and January, a steady decline in unemployment benefit applications and a jump
in consumer confidence.
“The
slowing trend in productivity growth has largely confirmed that the cyclical
bounce in productivity that the economy typically experiences following a
recession has run its course,” said Troy Davig,
an analyst for Barclays Capital Research. “Future productivity gains
are likely to be harder won, so firms will likely need to rely increasingly
on adding to payrolls to increase output, rather than squeeze existing
resources.”
Unfortunately,
history suggests that's not quite correct. As the following chart shows, a
relatively sharp deceleration in the rate of productivity growth -- like
we've seen recently -- has, except on two occasions over the past five
decades, preceded or been associated with a slowdown in the pace of hiring.
Of course, this
time could be different -- right?
Michael J. Panzner
|
