December 2, 2016

The latest jobs report finds that the somewhat slower pace of job growth could be associated with a speedup in productivity growth. Productivity grew at an annual rate of 3.1 percent in the third quarter, the fastest pace in two years. The quarterly numbers are highly erratic, and the 3.1 percent figure followed three quarters with negative growth, but it could be the beginning of an uptick in the growth rate. Productivity growth has been extraordinarily weak in this recovery, which is the reason that job growth has been relatively rapid in spite of weak GDP growth.

If the weak productivity growth is explained by the availability of low cost labor, which can be profitable to hire for low productivity jobs, then a tightening labor market would be expected to lead to more rapid productivity growth as workers switch from low paying, low productivity growth, to higher paying, higher productivity jobs.

For more, check out the latest Jobs Byte.

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