Decline in U.S. productivity may signal need for hiring

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U.S. productivity dropped 0.9 percent during the April-June quarter, marking its first decline in more than a year, according to msnbc.com. The drop in productivity is a sign that companies may need to hire more workers in the near future.

Worker productivity posted large gains during 2009, rising 3.5 percent—the best showing in six years. This demonstrated that companies could produce more with fewer workers as they cuts jobs and unemployment increased.

Economists say the recent decline in productivity could be a welcome change if it leads to more hiring. They believe the large gains posted in recent quarters are harming the chance for economic rebound.

Worker productivity is an important part of boosting living standards because companies can pay workers more when production increases without being forced to raise the cost of goods. Economists say if companies stop cutting jobs and start rehiring laid-off workers, incomes will increase and, as a result, so will consumer spending.

The 0.9 percent drop in productivity during the second quarter was the first drop since the fourth quarter of 2008 and the biggest drop since productivity declined 1.3 percent in the third quarter of 2008.

Additionally, unit labor costs climbed 0.2 percent in the second quarter following a 3.7 percent decline in the first quarter. It was the first increase since the second quarter of 2009.

8/10/2010

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