IBJOpinion

HICKS: Productivity gains make for jobless recovery

Back to TopCommentsE-mailPrintBookmark and Share
Mike Hicks

So it has come to pass that the U.S. economy has surpassed pre-recession levels.

In the fourth quarter of 2010, the gross domestic product (the value of all goods and services we produce) topped the last record high, reached in the second quarter of 2008.

This is good news, of course, but there is a tarnished silver lining to that cloud. We have broken record levels of production with almost 7 million fewer folks working. How can that possibly be? There are two explanations, but I begin by providing an example.

Imagine a factory shift, or a restaurant crew, of 21 workers. If one person gets ill or quits, the crew will manage without them. The better the worker, the harder it is to fill that gap. If the absent person is a bad worker, maybe the shift goes easier without him. Something like this is what has happened in this recession. About one in 20 workers has lost his job. How can we produce more with fewer workers?

Our economy has seen remarkable productivity growth since the start of the recession. As in our factory floor example, each worker gets a bit better at his job, so the same level of economic activity is produced with fewer workers. The data point pretty strongly to this as a cause. At the end of last year, each American worker was producing about 5 percent more goods or services than he was producing in mid-year 2008, when output last peaked. That is due to better-managed operations, better workers and better use of technological improvements.

The second reason for the higher productivity is that the pre-recession years saw a bubble not only in housing markets, but also in labor markets. As a consequence of this, many weak or mediocre firms were buoyed by the artificially high level of demand for goods and services. A dual consequence was that all workers in poor firms and poor workers in good firms were employed at a time they should have lost their jobs. So, the bubble kept workers in jobs that were not viable in the long term.

Had market signals prevailed, workers in weak companies or with outdated skills would have been forced to retrain or relocate slowly over several years. This would have boosted the unemployment rate in 2004-2007 a tad, but would still have been far less disruptive than the bursting of a bubble we saw in 2008.

Both explanations are partly true, and how much of each is a matter for scholarly speculation. The problem is, we now have 7 million people that businesses really don’t need. Some of this will change in the coming months, but the harsh reality is that technological change has rendered a good many of these folks redundant.

It is an old story, but a nevertheless disheartening one. It is also a tale rich in its implications for young workers. About 6 million of those currently unemployed, about 85 percent, have only a high school degree or less.•

__________

Hicks is director of the Center for Business and Economic Research at Ball State University. His column appears weekly. He can be reached at cber@bsu.edu.

ADVERTISEMENT

  • President of Express Employment - Indy South
    Mike - your article was right on. I wrote an article on our website a couple months ago called "The New Normal" We are also seeing a miss match in what employers need and the candidate pool. There are good people available but employers are being very specific with what they want and many lack the skills needed - not bad people, just employers are asking for more in this economy. We are also seeing employers not willing to take risks on those applicants that have more skill than they need and were highly compensated during the "bubble" - afraid that they wont stay. Employers are cautious and are not willing to hire with out a very good match.

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. Uh, sorry Johnnie, but you are incorrect. Despite the assertions by yourself and various defenders and captains, sports attendance is NOT off significantly at most sporting events in the US. Variances in attendance has been in the range of single digits, both + & - for years now. MLB has had most of its best overall attendance nubers in the last decade, and that trend has been consistent for most major sporting events. The number one issue cited by most fans when asked about attendance is the overall cost of attending. The presence of HD and big screen televisions in home doesn't even register, as a factor for not attending an event. VALUE in the product is the key, and apparently is something lacking in the current ICS. What other explanation is there when with what is routinely touted as the "best" racing on the planet, fans are staying away in DROVES. A "close" title battle into the last event at Fontana, with the "cars and stars" of the ICS, and who showed up? MAYBE 8K. Sorry, but HD TV isn't to blame for that kind of fan apathy.

  2. Do you need finance to establish your business ? Are you interested in getting a loan at 3% from our private company? If so please Email: suntrust_oil@blumail.org

  3. If she was worth the $ the public outcry over direct tv dropping them would have kept them on their dishes as we have seen with other companies. I too quit watching channel 13 after she showed up since I left channel 8 because of her all show rather than production results. When Randy on 8 corrected her she had a big head and incorrectly challenged his correction for pronunciation of a city. Other antics while she matures was too much for me with her very inaccurate forecasts. All the forecasters were predicting rain until Thursday except Chris. They predicted sunny on Thursday but instead of rain until Thursday upon which the sun would finally make it out in full glory Chris was right on the money just as I too predicted looking at the radar on weather.gov. One thing I love about Angela is the fear you can see in her every time it thunders in the winter. It far exceeds the entertainment value of her body language (high heel noise drags, depression, etc) when her forecasts are so incorrect. Her hair stands on end, you have to see it!!!

  4. Good Day, Apply For A Loan I am Mr Fernadez Antonio, a private Loan lender and a cooperate financial for real estate and any kinds of business financing. I also offer Loans to individuals, Firms and cooperate bodies at 3% interest rate We offer any kind of loans. email us via fernadezloaninvest@outlook.com LOAN APPLICATION FORM First name:......................... Middle name:......................... Last name:........................................ Date of birth (yyyy-mm-dd):....................... Gender:........................................... Marital status:................................... Total Amount Needed............................... Loan Duration.................................... Address:.......................................... City:............................................. State/province:................................... Zip/postal code:.................................. Country:.......................................... Phone:............................................ Fax:.............................................. Mobile/cellular:.................................. Monthly Income.................................... Occupation:....................................... Best Regard, Mr Fernadez Antonio.

  5. i will love to share my testimony to you all the people in world i got married to my husband about 2 year ago we start having problems at home like we stop sleeping on the same bed,fighting about little things he always comes home late at night,drinking too much and sleeping with other women out side i have never love any man in my life except him. he is the father of my child and i don't want to loose him because we have worked so hard together to become what we are and have today .few month ago he now decided to live me and the kid,being a single mother can be hard sometimes and so i have nobody to turn to and i was heart broken.i called my mom and explain every thing to her,my mother told me about DR.okoro how he helped her solve the problem between her and my dad i was surprise about it because they have been without each other for three and a half years and it was like a miracle how they came back to each other. i was directed to DR. okoro on his email:okorospell@gmail.com and explain everything to him,so he promise me not to worry that he will cast a spell and make things come back to how we where so much in love again and that it was another female spirit that was controlling my husband he told me that my problem will be solved within two days if i believe i said OK So he cast a spell for me and after two days my love came back asking me to forgive him i Am so happy now. so that why i decided to share my experience with every body that have such problem contact Dr okoro the great spell caster on his email addresses spellcasterforlove@outlook.com

ADVERTISEMENT