The Bureau of Labor Statistics has announced that during the third quarter of 2009 labor productivity rose sharply:
Nonfarm business sector labor productivity increased at a 9.5 percent annual rate during the third quarter of 2009, the U.S. Bureau of Labor Statistics reported today. This was the largest gain in productivity since the third quarter of 2003, when it rose 9.7 percent. Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours of all persons, including employees, proprietors, and unpaid family workers. Output increased 4.0 percent and hours worked decreased 5.0 percent in the third quarter of 2009 (All quarterly percent changes in this release are seasonally adjusted annual rates).
From the third quarter of 2008 to the third quarter of 2009, nonfarm business output fell 3.5 percent and hours worked fell faster, 7.5 percent, resulting in a productivity increase of 4.3 percent (tables A and 2). The four-quarter decline in hours was the largest in the series, which begins in 1948. Nonfarm business productivity rose 1.8 percent in 2008, and 2.6 percent per year on average during the 2001-2007 period corresponding to the last complete business cycle.
Unit labor costs in nonfarm businesses fell 5.2 percent in the third quarter of 2009; the increase in productivity outpaced the increase in hourly compensation. Unit labor costs declined 3.6 percent over the last four quarters–the largest decrease since the series began in 1948 (tables A and 2). BLS defines unit labor costs as the ratio of hourly compensation to labor productivity; increases in hourly compensation tend to increase unit labor costs and increases in output per hour tend to reduce them.
Productivity increased 9.8 percent in the business sector in the third quarter of 2009. This was the largest increase in the series since the second quarter of 1972. Unit labor costs decreased 5.1 percent during the third quarter of 2009 (tables A and 1).
This is another way of saying that businesses are laying off employees with only a small reduction in output. That doesn’t bode well for future unemployment figures or suggest that we’ll see robust job growth any time soon.
You are presuming that people will continue to work at the higher levels of productivity. That is questionable because it effectively lowers their wage.
No, I’m just assuming that the higher productivity is a consequence of producing the same or nearly the same amount with fewer people. That’s something that can continue indefinitely. That’s supported by the numbers: production is staying high, employment continues to fall, wages are up for the people who are still employed. Higher productivity doesn’t necessarily mean that people are working any harder, longer, or smarter. It just means that there’s less labor per unit of output. That can be achieved by trimming unproductive jobs which is what I suspect is mostly what has happened.
Unless demand increases that extra 3% production won’t be needed. And as people lose their jobs demand is likely to stay low or even fall farther.
But why? Less people working more hours? Or less people producing more stuff because….? If it is the latter, what is it? If its more hours I see it as temporary.
Really? Then how did we ever recover from 1972? Yes, the gain itself might be continued, but the rate of improvement can’t. And unemployed people are resources not being used, they can be used elsewhere.
Here is what you are saying, as I read it.
“Employers can make just as much as we did before, but with less people. So, employers are not going to be re-hiring workers.”
Not bad, but two observations:
1. Why stop at “just as much as before”?
2. Unemployed resources (from one type of activity) are reseources that could be used in another productive activity.
Of course, how long people take to move from one field of employment to another is an issue, and things like unemployment benefits probably don’t help in speeding up the transition, but it does make it easier on those who are unemployed.
Anybody who’s every walked the halls of a Fortune 500 company knows why.
I think the better question is why didn’t they shed the jobs earlier? I believe the answer to that resides in the nature of bureaucracy. Generals aren’t generals unless they have lots of troops reporting to them.
Something I haven’t seen commented on is the two-job family as a retarder of creative destruction. When one of the couple loses his or her job while the other retains his or hers, it’s another disincentive for moving or changing careers. Add a house that’s impossible to sell without a walloping loss to the mix. That’s aggravated by the things you’ve mentioned: unemployment benefits, cost of training or certification, and so on.
I thought a good example of what we’re talking about were the stories of furlough days. I think Joyner posted a story about one in which nobody noticed any difference — the jobs could be done in 32 hours. The 40 hour / 52 weeks definition of full employment might not be the most efficient standard for labor. When I worked on the assembly line, the 8 hour day made sense — there were three shifts back to back with barely a pause in between.
I think a number of companies have used the unemployment rate to negotiate a more favorable structure and as long as the employees have few alternatives they will accept it.
People can work harder for a while, but depending on the job, not forever. It leads to illness , divorce worker burnout. Work is never spread equally, there are always those who avoid their share. The increased work load will hit them some, but even more will fall upon the good workers.
Steve