slacker.jpgThe news today about the economy creating no new net jobs last month, and the unemployment rate sticking at 9.1 percent, is bad news for everyone out there looking for work. But yesterday, there was some good news coming from the Bureau of Labor Statistics.

The government agency reported U.S. productivity made its biggest drop since 2008. So basically that means workers aren’t able to churn out products and services as fast as they once were. This may be good news. For many months during the recession, employees were working like dogs, putting in longer hours, doing the job of two or three people, and employers were reaping the benefits in the form of hefty profits. Essentially you guys were doing more but it translated into less labor costs for companies.

Now it seems employers have pushed employees as far as they can, so it may be time to hire. But that means you people lucky enough to have jobs have to resist picking up the slack, or working for free on your own time, etc.

There is of course a Catch 22 to this approach. You could risk angering your boss and ending up on the unemployment line yourself. But working yourself to the bone isn’t going to help anyone either, especially not you or your family. You get know medals for burn out folks!

It all comes down to what works for you. But some economic theories seem to suggest a drop in productivity could lead to hiring.

I was on NPR’s Talk of the Nation a while back discussing whether the rise in productivity last year was hampering job growth. The economist on the program with me, Marisa Di Natale, director at Moody’s Analytics, said there wasn’t much incentive for employers to hire more workers if workers are putting in over time, taking on multiple jobs, and maintaining the output.

That’s how some economists saw the drop in productivity reported yesterday. This from an Associated Press article after the productivity data was released:

A slowdown in productivity growth is bad for the economy if it persists for a long period. But it can be good in the short term when unemployment is high, if it means companies are reaching the limits on how much extra output they can get from their existing work forces. It can signal that companies need to increase hiring.

Joshua Shapiro, chief U.S. economist at MFR, Inc., said many businesses are in a tough position because they cut so many workers during the recession and have little leeway to reduce staffs further unless demand “nosedives.”

“Therefore, the gap between growth in output and the rate of expansion in total hours worked has narrowed, which by definition means slower productivity growth and therefore a more difficult environment for profit margins,” Shapiro said.

There in lies the rub, however. If businesses see their profits shrinking they get nervous, so they don’t want to spend money on hiring. But if they do hire and create more output their profits could go up even further.

It’s a game of chicken. Will employers continue to refuse to hire people? Will employees continue to rein in their productivity?

Who will yield?

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