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Strategies & Market Trends : Currencies and the Global Capital Markets
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To: Ahda who wrote (3081)5/8/2001 2:03:32 PM
From: Hawkmoon  Read Replies (2) of 3536
 
Productivity is directly linked to the quantity of goods workers produce per labor hour performed.

When GDP growth is in decline and fewer products are produced, obviously productivity will decrease because the same number of people are now producing fewer products.

But this is not that workers are not ABLE to produce more goods, but that there is not sufficient demand for more products.

Businesses are loath to downsize their workforce for any number of reasons, including loyalty, lost cost of a trained worker, and the implied cost to train a replacement at some point in the future when demand for the businesses products increase again.

Workers are a high-cost investment, which is why temporary workers have been in such high demand. They can be released from their contracts much more easily than the "cadre" workforce who possess occupational "tenure".

When the Fed finally arrives at a point with interest rates where businesses are once more willing to invest and expand their businesses, based upon greater ability to generate profits on borrowed expansion capital, then productivity would increase commensurately.

Demand/Supply curves for company products are much more sensitive to Just In Time forces than is the workforce.

When you start laying off full-time staff and downsizing operations to a proper equilibrium between production and labor force, productivity will once more properly reflect potential.

Hawk
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