Output and Profits Per Worker Are at Record Highs; Bad News: That Means a Jobless Recovery Ahead
The chart above shows quarterly increases in worker productivity, using output per hour from the BLS for the nonfarm business sector. The shaded areas highlight the one-year periods following the end of the last three recessions (1990-1991, 2001, and 2007-2009), and show the huge surges in productivity in the early stages of the subsequent expansions - as companies learn how to "do more with less." Notice that the productivity surge was greater following the 2001 recession than the 1990-1991 recession, and now the most recent productivity surge characterized by two consecutive quarters of gains above 6% (2009:Q3 and 2010:Q1) is much greater than the 2002 period. It's partly those productivity surges that translate into "jobless recoveries," and this time will be no different, and might actually be longer than the post-recession periods of weak job recovery following the last two recessions.
What motivated this post was a story in the Washington Post last Friday titled "Rising worker productivity, innovation boosts profits but may lessen hiring need," and here are a few key points:
"Companies slashed 8.5 million jobs during the worst recession since the Great Depression while also slowing capital investment plans. Campbell, the world's largest soup maker; DuPont, the country's third-biggest chemical maker; and United Parcel Service, the world's largest package-delivery business, are asking workers to help save cash by working smarter with existing technology. A potential cost: Efficiency gains reduce the chances that recession-casualty jobs will come back.
Growth in productivity, or output produced in an hour of work, averaged an annualized 3.4 percent in the five quarters since the 18-month recession ended in June 2009. That is similar to the 3.7 percent gain in the first five quarters after the 2001-03 so-called jobless recovery. The efficiency gains have paid off in corporate profits. Earnings from continuing operations of companies in the S&P 500 have rebounded 23 percent since the fourth quarter of 2007. Sales have declined 9 percent over the same period."