What can businesses make of the latest Labor Department numbers?
The good news: Worker productivity shot up 2.5% in the April-June quarter.
The bad: That jump looks better compared with the 4.5% drop in January-March, coupled with the nightmarish 2.1% contraction in GDP.
The good: Labor costs are up slightly (0.6%), which means workers are in greater demand.
The bad: The increase is anemic compared with strong economic periods over the past 30 years.
And the ugly: Over the past 12 months, productivity has increased 1.2%. That’s well below the long-run average, 2.2%.
‘We can’t find enough qualified candidates!’
Economists have a variety of opinions for the low productivity rate over the past five years.
Employers overwhelmingly cite the same reason: They can’t find enough qualified workers.
Not that companies aren’t hiring though. They are – adding an average of 244,000 jobs a month over the last six months. That’s the highest six-month hiring rate since 2006!
But companies are hiring less-qualified people at lower or stagnant wages. Thus the minor gain in productivity with wages staying the same.
What’s it all mean long-term? Your guess is as good as ours.
At the very least, interest rates won’t budge anytime soon knowing the Fed’s track record.
What’s your take on the economy? Leave a comment below.
