Tuesday, August 11, 2009

Productivity is Up, but Where are the Employed Consumers to Buy this Stuff?

The economic recovery is starting to get a little scary. What the following article presents to us is a third world economic picture for the U.S.. We may have won the race to the bottom.

AP) - Productivity surged in the spring by the largest amount in almost six years while labor costs plunged at the fastest pace in nine years. The results point to a recession losing steam, but they do not bode well for the unemployed or those forced to work shorter weeks who were hoping for more hours.

The amount of output per hour of work, rose at an annual rate of 6.4 percent in the April-June quarter, while unit labor costs dropped 5.8 percent. Both results were greater than economists expected.

Productivity can help boost living standards because it means companies can pay their workers more, with those wage increases financed by rising output.

However, in this recession, companies have been using their productivity gains from layoffs and other cost cuts not to hire again but to bolster their profits. The result: Many companies have been reporting better-than-expected second-quarter earnings despite falling sales. Businesses producing more with fewer employees means millions of unemployed Americans likely will continue to face a dismal job market.

A lack of wage growth and a shortage of jobs will likely depress consumer spending, which accounts for about 70 percent of economic output.

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