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Productivity Numbers Mask Job Cuts and Retention Issues

For anyone waiting for employment to rise on the coattails of reported gains in productivity and the Gross Domestic Product (GDP), don’t hold your breath, said several economist who spoke to BusinessWeek.

Worker productivity is up, but it's not the whole picture of the economy.

GDP is up, but it a hiring boom is unlikely to follow, said leading economists.

The latest improvement in GDP won’t lead to increased hiring because it was based on decreased hiring, said some of the world’s leading economists, including John Galbraith of the University of Texas and Capital Economics’ Paul Ashworth, in the BusinessWeek article, The Dark Side of the Productivity Surge.

Ashworth argues that the optimists on productivity are getting things backwards. The optimistic argument is that higher productivity will lead to more employment. But he notes that it was falling employment that caused the higher productivity in the first place. “People are basically saying the decline in employment is going to cause more employment,” Ashworth says. And that is not a very good bet.

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