When workers become more efficient, it’s normally a good thing. But lately, it has acted as a powerful brake on job creation. And the question of whether the recent surge in productivity has run its course is the key to whether job growth is finally poised to take off.
One of the great surprises of the economic downturn that began 27 months ago is this.. Businesses are producing only 3 percent fewer goods and services than they were at the end of 2007, yet Americans are working nearly 10 percent fewer hours because of a mix of layoffs and cutbacks in the workweek.
(46) That means high-level gains in productivity--which in the long run is the key to a higher standard of living but in the short run contributes to sky-high unemployment. So long as employers can squeeze dramatically higher output from every worker, they won’t need to hire again despite the growing economy.
(47) On Friday, the Labor Department will release a closely watched March employment report expected to show the pest job growth in three years, driven by stabilization in the economy and a rebound from February snowstorms.
A p March job-growth number-at a time when the economy is growing at only a middling pace--would suggest that the productivity boom has largely run its course. (48) Regardless, the question of what caused the burst in workers’ efficiency is one of the great unanswered questions of the expansion and has huge stakes for the economy over the coming year.
"It is an episode that we’re going to--we, economists in general--are going to want to understand better and look at for a long time," Federal Reserve Chairman Ben S. Bernanke said at a hearing last week in which he described the productivity gains as "extraordinary" and acknowledged he had not foreseen them.
(49) Businesses have certainly not been investing in new equipment that might enable workers to be more efficient-capital expenditures plummeted during the recession and are rebounding slowly. (50) And the structural shifts occurring in the economy are so profound that one would expect productivity to be lower, rather than higher, as people need new training to work in parts of the economy that are growing, such as exports and the clean-energy sector.
So what’s happening As best as anyone can guess, the crisis that began in 2007 and deepened in 2008 caused both businesses and workers to panic.
(50) And the structural shifts occurring in the economy are so profound that one would expect productivity to be lower, rather than higher, as people need new training to work in parts of the economy that are growing, such as exports and the clean-energy sector.