Most economists say that the economy is either in a recession or very close. That means few if any, new workers should be hired, the number of job openings should fall, and there should be an increase in the number of workers filing for unemployment.
Jobs data released this morning indicates just the opposite is happening.
The economy added 315,000 jobs in August. That usually means the economy is growing. The number of job openings increased by 500,000 in July. According to those numbers, the economy should be seeing strong growth. Yet growth is negative.
Not Up to Par
Those job numbers mean companies’ current employees can’t produce enough output to meet the current and anticipated future demand.
If business believed that a recession was imminent, which most do believe, then no new workers would be sought. If there is an output shortfall, companies would have current employees work more efficiently or perhaps provide incentives for employees to work more than the normal hours.
Considering the current recessionary environment, the number of newly hired workers and the number of job openings should fall. The U.S. has not had any economic growth since the end of last year. With the Federal Reserve’s restrictive monetary policy, future growth will be very sluggish, at best.
Interest rates will continue to rise, and money supply growth could be near zero. While that’s designed to reduce inflation, it will also reduce economic growth.
So why are so many workers being hired?
There is much uncertainty in the economy. Business is usually reluctant to hire when there is much uncertainty.
Inflation creates uncertainty. Business doesn’t know if the inflation will be higher on the cost side or higher on the revenue side. That means they can’t accurately forecast profit, which makes decision making very difficult.
Consumers are uncertain because they don’t know how much longer they can afford the higher prices before it significantly causes a reduction in their standard of living.
That all means that the number of new workers and the number of job openings should have fallen. Instead, they rose. What’s happening?
The answer is that American workers are becoming less productive.
This phenomenon first appeared when the data for economic growth, employment and productivity for the first quarter of this year was released. Since employment numbers are released monthly, we knew that nearly 600,000 jobs were added in each of the three months. That number is more than three times the historical monthly average.
Yet first quarter GDP declined by 1.4% as the workforce expanded by 1%. The economy added nearly 1.8 million workers, yet output declined. What were those workers doing?
The answer came when the productivity number was released. Normally, workers’ productivity improves at about a 2% annual rate. The first quarter productivity number was -7.5%. That explains why there were more workers employed, yet they produced less output.
Low productivity usually comes from a number of factors.
It could come from some workers being out of the labor force for a long enough time so that their skills become very rusty. It may just take some time for those workers to become productive.
Or it could come from some behavioral factors.
There is a concept circulating throughout workplaces. It is known as “Quiet Quitting.”
According to one source:
Quiet quitting refers to not overwork yourself or doing any extra things that you won’t get compensated for. Simply put, it is doing your job without your job taking over your entire life.
If a significant portion of the population followed this position, that could at least partially explain the negative productivity. That’s especially true if a sister concept “Quiet Firing” is also prevalent. That occurs when companies fear legal action from terminating an employee, mostly because employees often claim bias or misconduct by the firm.
Instead of firing the employee, the firm just puts the employee in a difficult and unproductive role hoping they quit.
Both factors, i.e. quiet quitting and quiet firing — and, perhaps a certain lackadaisical attitude created because the government has given free money to nearly all workers while encouraging them to not work — could explain the negative productivity. While the desire for a better work/life balance is positive for most people, if the new balance results in much less output being produced, then it is a problem.
The key is to figure out how to get the same amount of work done in less time to create productivity increases. And then try to figure out how to produce even more output in the same amount of time. That increase in productivity eventually raises wages and contributes to positive growth.
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