Monday, 30 June 2008

Productivity down, unit labour costs up - the recipe for unemployment

Very worrying, that is the only way to describe first quarter labour market developments. Productivity fell dramatically, while unit labour costs surged.

The two indicators point to a future rise in unemployment. Slowing productivity suggests that output is sliding south, but the number of workers producing that output has remained largely unchanged. In other words, firms have too many workers.

There is only one thing firms can do; in order to reduce labour costs and increase output per worker, firms need to start shedding labour.


VADO said...

The numbers tie in quite neatly with the slow first quarter GDP numbers that came out last week.

aSteve said...

The idea of worker productivity is so outdated. Worker productivity has a lot less to do with how many workers there are and a lot to do with efficiency of management. Workers are unproductive if they are permanently chasing their tails doing unproductive things - because the management can't identify what is profitable. For example, Wimpey's sales teams might be devastatingly under-staffed as Wimpy tries to cut back... but productivity is down because their product is garbage and their asking prices are cloud-cuckoo-land.

We need a good clear-out of the dead wood at the top. Hello mass unemployment.

seema said...

The signs of recession are unmistake.