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Slower productivity may boost hiring

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Slower productivity in the U.S. may force employers to hire more workers, according to The Wall Street Journal.

After growing quickly in 2009, productivity slowed and then reversed this year, signaling that many companies are becoming limited by their bare-bones staffs.

"Businesses were able to squeeze their work forces, but that wasn't sustainable," says Michelle Meyer, economist for Bank of America Merrill Lynch, Glastonbury, Conn.

Although slow productivity is not ideal, with a 9.6 percent unemployment rate, increased hiring would help the economy more than improving the productivity of the current work force.

It reportedly is normal for productivity to surge at the beginning of an economic rebound and recede as hiring increases. However, in 2009, productivity grew at an average annual rate of 6.2 percent—the fastest pace since the 1960s—slowed in the first quarter of this year and contracted in the second quarter, falling 1.8 percent, which was an extreme reversal.

In the third quarter, the economy seems to be growing at about the same rate as companies are increasing workers' hours, which will result in little productivity growth. Economists expect productivity will grow around its historic average of a 2 percent to 2.5 percent rate in future quarters.


9/23/2010

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