Job generation and job recovery could get a shot in the arm from a decrease in worker productivity. By getting more output from fewer workers, corporations that laid off workers during the recession have been increasing their earnings. But the latest report from the Labor Department on worker productivity may indicate that employees have reached their limit. Businesses may have to start hiring to maintain growth and revive economic recovery if that turns out to be true. Resource for this article - Decline in worker productivity may be good for economic recovery by Personal Money Store.

When declining worker productivity is good news

After posting large gains in 2009, the Labor Department said that worker productivity declined at an annual rate of .9 percent within the second quarter. The Associated Press reports that United States of America worker efficiency is the key ingredient to boosting living standards. It allows companies to pay workers more because of increased production without raising the cost of goods . In most cases a slip in productivity would be a troubling sign for the U.S. economy. But economists believe the unemployment rate has become a threat to the corporations that are slashing their work forces. Increased hiring will create the jobs consumers need to increase spending, which accounts for 70 percent of the U.S. economy. And that would ultimately lead to more demand for those companies' products.

Businesses profit from overworked employees

For businesses that may have believed the U.S. had entered a period where output could keep climbing without bringing people back to work, CNN reports the latest worker productiveness numbers are a dose of reality. Companies did more with less during the worst of the recession. However, the amount of hours worked rose faster than output in the Labor Department report. Nariman Behravesh of IHS Global Insight in Lexington, Mass., told CNN that corporations probably "overdid it" with layoffs during the recession. He said that if for no other reason than keeping employee morale up, companies may have to hire more to keep away from worker burnout.

Deflation might be price of high unemployment

Job creation is likely to remain weak for the next few months, Behravesh told CNN. Nevertheless, he's optimistic that more than 100,000 jobs a month could start materializing within the private sector by the end of the year and possibly 150,000 jobs monthly mid-2011. At the opposite end of the spectrum is a report from ABC News, which said that dropping efficiency is just one more sign that the economic recovery is in danger of heading south. The overall economy grew at only a 2.4 percent annual rate within the second quarter, down from a 3.7 percent rate within the first quarter. with the unemployment rate mired at 9.5 percent, officials at the Federal Reserve are concerned that companies will see the high unemployment rate as an possibility to push wages down for individuals who still have jobs, which could start a debilitating cycle of deflation.

Additional reading

Google

google.com/hostednews/ap/article/ALeqM5gNiyJ905Ho0Ur96V2TQhsBX19lGwD9HGMHAO0

CNN

money.cnn.com/2010/08/10/markets/thebuzz/

ABC News