Worker productivity takes an unexpected fall. Expect your labor costs to go up and your margins to go down.
Worker productivity is a key factor in determining your company’s profitability. As your employees become more productive, they deliver the same output in less time and for less expense, boosting profits. Everything has a limit though, and at some point your ability to squeeze more output out of the same workers will end. At a national level, it looks like we have reached this point.
According to the Department of Labor, U.S. workers productivity fell more than expected last quarter, dropping at an annualized rate of 2 percent while expenses per worker increased more than expected, by 4.5 percent. This indicates that many companies are experiencing demand for more products and services but can’t deliver them without hiring more people and paying a higher wage.
If this reduction in productivity becomes a trend, it’s a good indicator that hiring and wages should improve in the coming months. While this is a mixed bag for individual businesses that will see their margins decline, it’s a good boost for the economy, as too much productivity can lead to persistent unemployment, which hurts consumer demand.
Who is Mike Periu?
Mike Periu is the President of Proximo, LLC, a company that markets education and training programs to small business owners, entrepreneurs and consumers.
Mike Periu has been interviewed over 500 times for broadcasters including CNN, NBC TVE, RTE and others. Mike is a contributing author to OpenForum, Yahoo! Finanzas and the Huffington Post.
Mike graduated from Georgetown University in Washington, DC. His degrees are in Finance and International Business. In addition to his work Mike is also on the Board of the Council for Economic Education.
