Increased Productivitiy: Labor's Nemesis During a Recession

Last week's first-time claims for unemployment insurance came out this morning and, once again, they were higher than expected. A consensus survey of economists had projected that the claims number would be around 455,000; but, it was higher at 480,000. In a non-recessionary period, that number would normally be below 300,000.

But, more than the fact that more workers were laid off than expected, the productivity number for this report jumped by an amazing 6.2 percent (Click to See Full Story from CNBC: "Jobless Claims Still Gaining; Productivity Up 6.2 Percent").

Simply speaking, a productivity increase like that means that businesses are finding ways to do the same amount of work with fewer people. With the job market as tight as it is, the average worker is being forced to work harder or longer and there isn't much that they can say or do about it because there is -- on average -- more than 6 unemployed workers who would be standing in line for any job that becomes available. So, now is not the time to quit your job if you have one.

Productivity increases have a long term effect on labor as businesses find better ways to produce the same output with less people and lower costs. Often, it is these "learned" productivity increases that help sustain high unemployment levels for long periods of time after an economic recovery has actually taken place. That's why unemployment is often referred to as a lagging indicator of recovery. So, in effect, time is not on labor's side. The longer the recession lasts, the harder it will be for America to get completely back to work. That's what happened during the Great Depression.

Sadly, we lost a whole year of high unemployment and stiff increases in productivity to this President and a Congress whose policies were more focused on health care, closing Gitmo, passing Cap and Trade, and paying off a voting constituency with a phony stimulus plan. In that year, businesses "learned" how to increase productivity and, ultimately, the unemployed will suffer a lot longer because of it.