Could Modest Gain in Worker Productivity Lead to More Hiring?

As reported in the November 4th, 2010 edition of the New York Times, worker productivity showed a modest gain of 1.9% in the third quarter of 2010.  Productivity is a key measure of the overall economy.  Ideally, we would like to see productivity in the 3% or more range.  Some economists are speculating that these relatively low rates will lead firms to boost hiring.  As we head into the holiday season where most are expecting better shopping activity than last year, there is hope that the fourth quarter will yield more jobs.

It is important to note that high productivity rates are highly correlated with better living standards.  Firms want to produce a high volume of goods and services at the lowest possible cost.  This occurs when workers are able to increase their production levels during a specified time period.  Certainly, machinery and investment equipment can increase those yields, but workers must have the intellect and skill levels to operate more complex machinery.  With increased pressures globally in manufacturing, it is critical that U.S. workers increase their knowledge of technology, so that jobs stay here and not go overseas. 

It should also be noted that these productivity rates are measured across a broad spectrum of industries.  Over time, it has been shown that workers with stronger educational levels and literacy rates will be more productive.  That is why advanced countries, such as the U.S., Canada, and Germany, will have higher productivity rates than developing countries in Southeast Asia, Latin America, and Africa.