American workers were doing more and making more in the past few months. U.S. productivity growth has been revised up for the latest quarter, to an annual rate of almost 3 percent.
But productivity can cut both ways: the more productive we are, the less incentive for employers to hire more people.
“The number was very strong from the business standpoint,” says Gus Faucher, senior economist at the PNC Financial Services Group. “Workers were producing a lot more — what that means is that businesses don’t need to hire as much in the short run because they can get greater output from their workers.”
Over the long run, though, that productivity growth also allows for a higher standard of living, Faucher points out.
So what does this number mean for the labor market in the new year?
“It’s a double-edged sword,” according to Faucher. Strong productivity growth is strong, which could mean that firms don’t need to hire as much. However, wage growth is very slow right now, which Faucher says makes labor relatively less expensive.
“I think in 2013, that side of the equation is going to push firms to hire more,” he adds.
As a nonprofit news organization, our future depends on listeners like you who believe in the power of public service journalism.
Your investment in Marketplace helps us remain paywall-free and ensures everyone has access to trustworthy, unbiased news and information, regardless of their ability to pay.
Donate today — in any amount — to become a Marketplace Investor. Now more than ever, your commitment makes a difference.