Not So Encouraging for the Labor Market

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news 300x199 Not So Encouraging for the Labor MarketRecent productivity data was not so encouraging  for the labor market.

According to the conventional wisdom, data released this morning should be taken as an encouraging sign for the labor market.

“US Worker Productivity Growth Slowed in Q4, Which Could Signal More Hiring in Coming Months” (Associated Press)

U.S. companies will have to keep hiring steadily to meet their customers’ rising demand. That’s the message that emerged Wednesday from a report that employers are finding it harder to squeeze more output from their existing staff.

Worker productivity rose at an annual rate of 0.9 percent in the October-December quarter, the Labor Department said. While that’s a slight upward revision from last month’s preliminary estimate, it’s half the pace from the July-September quarter.

Productivity, the amount of output per hour of work, grew last year at the slowest pace in nearly a quarter of a century.

A slowdown is bad for corporate profits. But it can be a good sign for future hiring. It may mean that companies have reached the limits of what they can get out of their existing work force and must add more workers if they want to grow.

That trend already looks to be happening. A report Wednesday from ADP, a payroll provider, estimated that companies added 216,000 workers in February. The survey did not include government agencies, which have been cutting jobs.

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