Skip to comments.Weak Productivity Is Another Bane of Recovery
Posted on 09/05/2012 2:45:31 PM PDT by Oldeconomybuyer
An upward revision in second-quarter productivity cant mask a disturbing trend in this recovery: Output per hour worked is growing below its potential and creating a drag on profits, incomes, living standards, and tax receipts.
On Wednesday the Labor Department said output per hour worked in the nonfarm business sector grew at an annual rate of 2.2% from the 1.6% reported a month ago.
But when compared with year-ago levels, second-quarter growth was just 1.2% the same muddling-along pace of the previous six quarters. Thats a far cry from the 3%-plus rate of the 1990s and early 2000s when businesses were reaping the benefits of the Internet and technology innovation.
Erik Johnson, U.S. economist at IHS Global Insight, says it is unlikely that businesses will be able to generate even a modest gain in output without a pickup in hiring. As a result, he says, productivity growth may decline over the next few quarters as the labor market regains steam.
IHS Global Insight forecasts productivity will grow below 1% for all of 2012, and Mr. Johnson says, It will be years, however, before productivity growth returns to its long-term trend rate of 2%.
(Excerpt) Read more at blogs.wsj.com ...