U.S. Fighting While We We're Down: Productivity Edition

Posted on Thursday, October 22, 2009

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WSJ reports:

Both the U.S. and South Korea saw productivity rise 1.2% in 2008, the first full year of the recession, from 2007. They experienced the largest increases of the 17 countries included in the Labor Department's international manufacturing-productivity report released Thursday. Productivity, which is defined as output per hour worked, declined in 12 of the countries, with the largest drops in Singapore and Denmark.

In the U.S., "productivity growth in manufacturing has been above that in services for some time," said Mike Elsby, an assistant professor of economics at the University of Michigan. "Put another way, manufacturing has been progressively doing more with less for 40 years. Consequently, I would expect it to continue."

Over the long run, productivity is key to improved living standards because it spurs rising output, incomes and asset values. But in a down economy, improving productivity with existing workers might mean hiring fewer new ones.