Productivity surges, job growth should follow

[ProSense]

Productivity surges, job growth should follow

By Lucia Mutikani Lucia Mutikani

WASHINGTON (Reuters) – U.S. business productivity grew at its fastest clip in six years in the third quarter and new claims for jobless aid fell to a 10-month low last week, suggesting the labor market may be starting to bottom out.

The Labor Department said on Thursday that productivity surged at a 9.5 percent annual rate, the quickest pace since the third quarter of 2003, as companies squeezed more output from a smaller pool of labor to hold the line on costs.

The Labor Department also reported that initial claims for state unemployment benefits dropped to 512,000 in the week ended October 31, the lowest level since early January. Markets had expected a decline to only 523,000, from the 530,000 reported in the prior week.

Some healing of the labor market is crucial to sustaining and strengthening the economy's recovery after its worst recession in 70 years, with employment key to underpinning consumer spending.

Analysts doubt that the rapid growth rate in productivity, which measures the hourly output per worker, can be sustained, which some analysts say means businesses may soon have to step up hiring to meet the demand for their goods and services.

more

[ClarkUSA]

1. A recruiter told someone I know today that the semiconductor industry is picking up. nt

[avaistheone1]

11. Semiconductor manufacturing is conducted offshore. How is that going to help us?

[ClarkUSA]

15. He's hiring for positions based in this country. That counts as job growth to me. nt

[avaistheone1]

17. All the major semiconductors companies produce offshore now. What company is this?

[ClarkUSA]

19. Are you looking for a job? PM me your resume and I'll send it along. nt

[bergie321]

16. That's funny

Because 2 semiconductor manufacturing plants in Arizona are closing.

[ClarkUSA]

20. Sorry to hear that... I'm just repeating what he said and I know he knows of positions. nt

[damonm]

2. Suck it, Righties...

The stimulus WORKS. You were WRONG.

[Kdillard]

3. Well they have never been right about anything so why ruin a perfect record.

[harkadog]

4. Productively increases do not bring jobs. The exact opposite.

It allows employers do to more with less workers.

[Phx_Dem]

6. But analysts don't expect productivity to remain high, which should

result in more jobs. Cross fingers.

"Analysts doubt that the rapid growth rate in productivity, which measures the hourly output per worker, can be sustained, which some analysts say means businesses may soon have to step up hiring to meet the demand for their goods and services."

[Zynx]

7. In the very long run the only way that aggregate standard of living improves is if productivity does

Otherwise it is very hard to get real growth.

[Enrique]

12. but wages aren't growing along with productivity

so really these productivity increases are the companies squeezing more profit out of the workers.

[Zynx]

31. I said in the very long run.

Short term distributional issues that can be corrected by policy have positively nothing to do with my statement.

[CTyankee]

41. Wasn't it Keynes who said "In the long run, we're all dead"? I think

the people he said it to were essentially making your point.

If I have misrepresented your point, please explain. I want to learn more...which is why I come to DU!

thanks...I'm not particularly blasting you here...I'm just trying to figure this whole thing out.

[Go2Peace]

27. Did you know that even China is losing Industrial jobs to "productivity" and automation?

We are entering a new era, even with the best economy we will never see job growth like we saw before. It was being talked about years ago, only we were naive and thought that we would simply be able to enjoy more leisure and recreation.

Instead the upper caste snatches all the productivity gains for themselves, and then we are all left to fight just to keep working. Sad state of affairs.

This is why we need truly FUNDAMENTAL change. The existing market philosophies will no longer hold up. We have to truly evolve or die.

[Zynx]

30. Redistributive policies can correct that. There is nothing inherently wrong with productivity

growth. In fact, without it humanity would still be in tents.

[Go2Peace]

34. True, 30 years ago we all thought the average work-week would be cut in half

If we actually did that we would all be better off.

[Raineyb]

69. Productivity has been increasing over the last 30 years

But the workers wages have not gone up to match it. Why would it change now?

[ProSense]

9. Here's the problem with your assumption

"which some analysts say means businesses may soon have to step up hiring to meet the demand for their goods and services."

Now, are you suggesting companies are increasing production for the hell of it?

[harkadog]

13. Not at all

Productivity is not a measure of production. It is a measure a production per man-hour. Employers, in response to the downturn, are using technology, changed work methods, and simply giving more work to existing workers to reduce the amount of man-hours per unit of production.

[mkultra]

21. in post recession, improved productivity comes from increased work hours

technology requires capital investment which is not plausible during a downturn. Once productivity reaches a certain point, it results in immediate job growth if GDP continues to rise. Rising productivity is catalyzed by increased demand. increased demand drives jobs. Every economist on the planet knows this as elementary economics.

[harkadog]

24. Every economist on the planet was wrong about this recession

[mkultra]

26. yes clearly. except for the ones that werent

If your playing the "your dumb so that makes you smart" card, then i wish you all the best. Your wild assertion is surely correct.

[harkadog]

28. And who was correct?

They should all be multi-millionaires right now because they would have been able to short the market. Please don't drag out some guy who said "This can't keep going on forever!" Psychics have better records.

[Zynx]

33. Roubini, Schiller, Stiglitz, and a number of other academic economists called

for varying degrees of severe economic downturns. The exact nature was not predictable because the collapse of Lehman was a peculiar event, not endogenous to any economic model.

[harkadog]

37. "Exact nature not predictable"

I'm sure those named are all in the Tropics someplace because of all the money they made shorting the market.

[mkultra]

38. the fact remains that the are all on record predicting the downturn

They are of course, more respected now, whether they chose to go heavily into the market with their personal finances or not. Im sure if you use that big brain on your shoulders, you could see how being invested heavily in a given sector could influence both your work as an economist and your reputation.

[harkadog]

60. Most professionals put their money where their mouth is

I predict a another downturn in the future.

[mkultra]

62. most professionals avoid conflict of interest

another downturn? How exatcly will you measure that? GDP for one quarter? state your terms big man.

[harkadog]

66. There is no conflict of interest

Shows how little you know about economics or the market.

[mkultra]

75. clearly

Your grasp of facts is very cheney like. Straight from the gut right?

[Garam_Masala]

68. Are these same folks predicting when jobs will pick up?

If they could pin point the decline in economy, surely they can
pin point APROXIMATELY when economy will pick up again?

Or was it just a fluke like those "psychics"?

Just for the record I am predicting here and now that stock
market will hit all time new highs. Jusy don't ask me when!

[mkultra]

74. hehe, well, most have said that we have made the turn

But that jobs will come later. I do think that one of them(which i will not name) is a constant downer. If you claim that things are going to go bad enough times, eventually you will be right. That is the psychic fluke.

[Go2Peace]

29. Answer me why almost every country in the world is losing industrial jobs?

..including China..

The world is changing. Those old economic rules you mention no longer work. We may get a brief reprieve for a while, but because of automation our goods and even services will require less and less labor.

[mkultra]

40. yes yes, automation increases productivity

The problem here is how much weight you are giving it. Lets put it in perspective. Here in the US, we are heavily automated. Our productivity numbers are very high and this is the reason why we are the largest manufacturer of any country on the planet(even bigger than china) with far less people.

productivity increases are part of the natural cycle. As GDP grows, employment goes up and is deflated some by advances. THAT act creates greater GDP thus demand increasing employment.

Get it? Its cyclical.

Yes, the old economic rules i mentioned do still work. Just in case you have been in a cave for a couple of years, let me mention that the rest of the world is losing jobs because we are in a global recession. We are the global economic leader(another old rule that still works). When our GDP rises, our productivity numbers will rise until hiring begins. Post recessionary rules are are different from standard economic rules.


The fact that automation results in less labor for goods equals more goods, not less labor.


I mean really. Are you trying to say that the increase in productivity is because companies have been plowing money into technology and automation through the recession?

[Go2Peace]

67. No, productivity has been increasing fairly dramatically since the 90s

You will have to prove to me it is almost entirely cyclical. It may have a cyclical component but there is a long term trend in fewer laborers to create goods. As I mentioned, this has been well known for many decades.

No offense, but it is you that are living in a cave.

[brentspeak]

48. Precisely

[mkultra]

49. inprecisley

automation allows for greater GDP

[ShortnFiery]

71. +1 Only the rich benefit. The rest of us fight over the scraps. eom

[OHdem10]

5. In todays world productivity soars when workers are laid off.

Company get same or more work out of fewer workers.

[mkultra]

22. providing GDP stays the same or grows.

the equation has two parts.

[Armstead]

59. The GDP swill continue to fall as we outsource production and jobs

[mkultra]

61. except that GDP is now growing

[Armstead]

63. Today.....nt

[mkultra]

65. or July August and September

As in the third quarter of 2009. In the second quarter, GDP decreased only .7%

[Thickasabrick]

8. Actually, I read something that said the exact opposite. The fact

that production is up with less workers does not bode well for the unemployed.

[ProSense]

10. There are those arguments, but

The Dark Side of the Productivity Surge

The third-quarter productivity numbers show that business is squeezing more work out of employees in hard times By Peter Coy

Rising productivity is usually one of the best things you can hope for in an economy. It means people are producing more for each hour they work. That's the path to higher living standards.

But the huge burst in productivity that the U.S. economy experienced in the third quarter is not entirely good. In fact, it's a sign that the U.S. economy is still in a sickly condition—a conclusion that is likely to be driven home by the latest job-loss figures release on Nov. 6. Economists who cheered the productivity number are ignoring the dark side of its sudden growth.

<...>

The trouble is that with demand so weak, employers may not be able to enjoy the benefits of those lower unit labor costs, says Paul Ashworth, senior U.S. economist for Capital Economics in Toronto. Instead, competition for scant business may force them to pass along their labor savings to customers by cutting the prices of their goods and services. There could be, he says, a vicious cycle of falling prices and falling wages, worsened by the fact that Americans have huge debt burdens that loom larger when incomes fall. In a research note, Ashworth said: "The upshot is that deflation is still by far the biggest threat."

University of Texas economist James Galbraith, in an e-mail message, says that "'Productivity' in this situation is a fairly meaningless construct," adding that the decline in hours "is not good for the working population." Galbraith said he sees "little reason for optimism" that economic growth will be strong enough to get employment back on track anytime soon.

True, it's not wise to read too much into one quarter's numbers. Economic Policy Institute economist Josh Bivens notes that "productivity quarterly numbers get really kind of goofy and volatile around turning points in the economy," such as now. Also, some optimists argue that higher productivity growth will eventually encourage companies to do more hiring. "In the second half of 2010 businesses will accumulate a strong pent-up desire to add more high-quality workers into their teams," IHS Global Insight (IHS) Chief U.S. Financial Economist Brian Bethune said in a Nov. 5 report.

But Capital Economics' Ashworth argues that the optimists on productivity are getting things backwards. The optimistic argument is that higher productivity will lead to more employment. But he notes that it was falling employment that caused the higher productivity in the first place. "People are basically saying the decline in employment is going to cause more employment," Ashworth says. And that is not a very good bet.

...there is always a dark side, but considering all the other trends, it's completely unrealistic to claim that this is not a promising sign.

[Thickasabrick]

14. I agree it is promising but only if consumers follow and start buying

which I don't see happening as long as so many are unemployed. It's a depressing circle right now.

[windbreeze]

18. automation is also a factor, I believe...

imo...more production with less workers...does NOT bode well for the unemployed..wb

[Go2Peace]

32. People need to wake up, life will never work quite the same. Factories and services are automating

like never before. That is why some countries in Europe have been reducing the definition of "full time employment".

We have to change and make them change in washington. The only way we survive is if we make the upper caste let the benefits of productivity and automation "trickle down".

[ShortnFiery]

23. bullshit. eom

[Yavin4]

25. All of these Economic Models Are Based Old Models of Domestic Workers

These productivity economic models do not account for work being done cheaply offshore.

For example, HP has huge facilities in India. If HP transfers more work to their Indian facility, then their productivity will rise because more work is being produced at cheaper costs.

IOW, the relationship between productivity and American jobs is broken.

[Zynx]

35. This is a measure of domestic production.

http://www.bls.gov/news.release/prod2.nr0.htm

[Yavin4]

64. It Still Does Not Reflect Work Being Done Overseas

In my example, HP is an American corporation, which has work done overseas. If they show productivity gains, it will look like an American corporation's productivity gains.

However, those gains won't translate to increase jobs or wages to American workers, which traditionally was the case.

[Zynx]

70. They are not counted regardless.

GDP does not count American companies' production overseas. GNP does. GDP is defined by production within the United States. Productivity is counted via GDP. Ergo, this is productivity within the confines of the US. The concern you have does not apply to this data series.

[Yavin4]

73. In The Age of the Internet....

How do you define work that's done overseas? Let's say HP has a software development team. The programmers are all in India writing the code. The Project Manager is here in the U.S., and the QC team is in Brazil. The beta testers are in Canada, and the techincal writers are in the U.S. The software is published in the US.

Where exactly was the software produced? Which country? Whose GDP does this project go under? If you say the US, then that's the problem with this model, and that's why productivity gains do not automatically translate into more jobs in the US nor higher wages in the US.

[Garam_Masala]

36. Productivity Increase = less people doing more! Less jobs!

By definition you need fewer workers to produce the same good and services
when productivity goes up.

[Teaser]

39. yes, yes, everyone knows that

but productivity increase has a ceiling. Beyond that ceiling you must make new hires.
That's the point here, that the PI has to occur before new hiring does.

[CTyankee]

42. It seems to me that if demand is diminished, no matter how productive workers are

nobody is buying what you are producing. This isn't an automatic thing...somewhere someone must be on the other end of the equation and I just can't see that happening...tell me where I am wrong, since I am not an economist...

[uponit7771]

43. Increased productivity being seen as a good indictor is top down (or supply side or "trickle" down)

...economic growth thinking IMHO.

If you look at money as water it's easier to pressurize the working class than the corporations to get things working.

Corporations let off the pressure to prop their equity prices and dividends the middle class releases the money pressure by buying stuff they need.

Give 50k to an out of work middle class person they'll spend it, give it to a corporation they'll save it or put it into propping their equity.

I'm not an economist but I do work in finance and this is what I've seen for the longest.

[mkultra]

50. that would be true if it were not coupled with a jump in GDP

when GDP and productivity both grow, what does that mean to you?

[treestar]

44. But it has to be the case before more people get hired

People on DU are so against profits, but there have to be profits for a company to grow (other than stimulus funds).

[Garam_Masala]

46. You nailed it!!!!!!! No profits = Less jobs

But I am also aware "profits" are a 4 letter word here on DU.

Also 91% of new jobs are created by small businesses. Yet most of the
stimulus & TARP money is going to big business and government jobs. That is not the
best way to "grow" economy. No growth = no new jobs.

[Name removed]

51. Deleted message

Message removed by moderator. Click here to review the message board rules.

[rucky]

45. I'll believe it when I'm hired. n/t

[brentspeak]

47. There are two types of people believe this: 1) idiots; 2) fools

[mkultra]

52. ill be looking for end of year report on the taste of crow

from you

[ShortnFiery]

53. Bookmarking so Brentspeak and I can reveal "the truth" in the future. Will you then believe?

I doubt it.

[mkultra]

55. well, if we get to the end of q1 2010 and UE hasnt started improving

then ill believe. This is exactly what was predicted.

[Kurt_and_Hunter]

54. True (though with a wrinkle)

Productivity gains do precede new hires. No doubt.

A sub-issue is whether the forced efficiencies of down-turns cause businesses to need to hire fewer on the other side of recessions to get the same output.

I suspect that is one factor in the ongoing relatively-jobless recovery syndrome that has been a feature of downturns for decades. (Not literally jobless, fof course, but under-performing.)

[xxqqqzme]

56. What is considered 'productivity' these days?

Are we still counting burger production?

[Kurt_and_Hunter]

58. You're thinking of manufacturing

Bush wanted to call McDonalds the manufacturing sector because raw (literally!) materials are "assembled" into a product

[anti-bigot]

57. kicked nt

[Brigid]

72. Three words:

We shall see.