U.S. Labor Department Wednesday published that the US worker productivity fell 0.9 percent at an annual rate from January to March, more than the government’s initially report of 0.5 percent, and even more than Reuters’s analysts polled of 0.7 percent.
Productivity rate is calculated as the quantity of output per hour of employee’s work. This unexpected rate of productivity fall implies that companies have less output for slightly more hours’ work, and this explains why payroll gains in May were the weakest in a year.
Economists have different opinions on how this productivity fall would influence the economy.
Before the report, a senior U.S. economist at Societe Generale in New York, Brian Jones, said, “If demand remains weak, employers will push the existing workforce harder to boost productivity. We think you’re going to see slower growth, and the breadth of hiring, at least according to purchasing managers, is the weakest it’s been since last December.”
The optimistic economists agree with Brain’s opinion about the breadth of hiring, because the productivity’s fall shows that employers are squeezing almost all they can from their current employees and need to hire more people in order to get more output.
However, some economists believe that with the influence of Europe on the entrance of recession, companies may limited their hiring or go overboard to seek for cheaper and more efficiency workers.
The point of economists’ forecasting is based on the growth of economy. Once economy begins to grow, companies would have to hire more workers with the purpose of keeping up with the rising demand. On the other hand, if the recession remains, job market would keep slump.
“Going forward, the big question is the rate of gain in output growth.” said Joshua Shapiro, chief U.S. economist at MFR Inc. “If it remains slow, as we feel likely, productivity gains will continue to be constrained."
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