Photo: Bloomberg via YouTube
Earlier on Thursday, we learned that nonfarm business productivity fell by 2.0 per cent in Q4, the sharpest drop since 2008. This was much worse than the 1.3 per cent decline forecast by economists.Intuitively, this is a bad thing. At least for businesses, managers will have to hire increasing numbers of workers to get that incremental amount of output.
The winners in this, obviously, are the people who are trying to get back to work.
“While slowing productivity over a broad time horizon is a troubling prospect for the economy, in the short term it is positive news for the labour market,” writes Deutsche Bank economist Joe LaVorgna. “In a low productivity environment, economic growth coincides with a faster pace of job creation.”
LaVorgna doesn’t think this decline in productivity is a bad thing in the context of the big picture.
“We see little reason to believe that at this point the productivity slowdown is anything more than a typical cyclical development. (Productivity commonly slows mid-cycle as hiring accelerates.) The chart below illustrates how slowing productivity growth coincided with faster hiring in the current economic cycle.”
Photo: Deutsche Bank
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.