The Numbers Are In: Worker Productivity Is Down, And Is Expected To Continue To Decline

February 7, 2013  |  

Hard to believe, but according to a new report from the Labor Department, worker productivity declined more than projected in the fourth quarter, meaning American employees are working less. (Productivity is the amount of output per hour of work.) This in turn pushed labor expenses up. Companies may be near the threshold of how much efficiency they can get from employees.

“The measure of employee output per hour decreased at a 2 percent annual rate, the worst performance in almost two years, after a 3.2 percent gain in the prior three months,” reports Bloomberg. “The median forecast in a Bloomberg survey of 63 economists called for a 1.4 percent drop. Expenses per worker increased at a 4.5 percent rate, more than estimated.”

According to USA Today, the “decline was caused by temporary factors.” The newspaper noted that the decrease was due in part because “economic activity contracted while hours worked rose. The economy declined at an annual rate of 0.1% in the last three months of 2012, a drop caused mainly by deep defense cuts and slower restocking, changes that are not expected to last.”

And don’t expect productivity to go up anytime soon. USA Today says economists predict worker productivity will be weak through 2013. “Higher productivity is typical during and after a recession, they note. Companies tend to shed workers in the face of falling demand and increase output from a smaller work force. Once the economy starts to grow, demand rises and companies eventually must add workers if they want to keep up,” the paper explains.

The economists predict the growth of the economy will be weaker in 2013. In 2012, the economy grew 2.2 percent. Another thing affecting the economic growth in the increase in Social Security taxes, which is reducing take-home pay. This will cause consumers to lessen spending. Across-the-board government spending cuts, which would go into effect on March 1, may also weaken growth.

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