The Productivity Paradox

by Jonathan Chait | March 31, 2010

Neil Irwin identifies a paradox of the recession: sky-high productivity has meant that business output has barely declined, making it less necessary to hire back laid-off workers:

One of the great surprises of the economic downturn that began 27 months ago is this: Businesses are producing only 3 percent fewer goods and services than they were at the end of 2007, yet Americans are working nearly 10 percent fewer hours because of a mix of layoffs and cutbacks in the workweek.
That means high-level gains in productivity -- which in the long run is the key to a higher standard of living but in the short run contributes to sky-high unemployment. So long as employers can squeeze dramatically higher output from every worker, they won't need to hire again despite the growing economy.

Irwin speculates that workers, frightened for their job security, squeezed more productivity out of every hour. That's probably bad for bloggers like me.

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