Over the past four quarters, non-farm productivity in America had its sixth-biggest jump since records began in the 1940s. That's good, right? It certainly is if you are an employer. More output per paid hours of work equals better returns. But for poor old employees it might simply mean less help and more sweat. Of course, productivity growth ultimately lifts everyone's prosperity. Those with jobs, however, may well wish for higher productivity, but not just yet.
One of the great myths about western labour productivity is that it is high and accelerating. Actually it fluctuates, and, as Smithers & Co points out, the long-run growth rate of output per person employed in the US is just 1.5 per cent per annum. Recently, productivity has been falling from elevated levels caused by the big post-crisis layoffs. That matters because if the economic recovery continues, companies are unlikely to meet higher demand from productivity gains. In other words, they will have to start hiring again.
Historic employment relationships also suggest businesses will be opening their gates again soon. According to Deutsche Bank, corporate profits per private worker in the first quarter returned to all-time highs, having fallen since the recession. When this level has been above trend before, it has tended to coincide with employment growth.