Productivity growth may have peaked, leading employers to find they need more staff to maintain operations. With corporate profits at record highs, companies can afford to hire more workers even with modest GDP growth of around 2%. If hiring increases as expected, it could boost the economy in the short-term by adding more buying power during the holiday season. While the relationship between employment growth and GDP growth is complex, increased employment likely helped lift the UK out of recession recently and may provide upside potential for both the US economy and labor market in 2013.

1. A Decline in Productivity Could Lead to Growing November 2012 | Issue 11 | Vol. VI
Employment and a Self-Sustaining Recovery
In recent months, initial unemployment claims have edged down and the four-week
moving average has fallen from over 400,000 claims a year ago to less than 370,000 a
week. In September, the reported unemployment rate fell to 7.8 percent crossing the
critical psychological barrier of 8 percent for the first time since early 2009. U.S. consumer
sentiment has actually reached a five year high in October according to the University of
Michigan index.
SC Palo Alto
“There is good reason to look at the economic data and say that the workforce situation Dave White
continues to improve,” says Rob Romaine, president of MRINetwork. “People continue to
see friends and neighbors going to work and nothing will rebuild sentiment faster than that. President and Owner
Consumer debt, which is increasing after years of consecutive quarterly declines shows
that people have more confidence in their jobs and in their economic future." 650 – 530 - 9011
www.scpaloalto.com
Adding weight to the deluge of economic figures, GDP grew at an annualized rate of 2
percent from 1.3 percent in the second quarter of the year. The figure was more positive
than many economists projected, yet it still is unlikely enough to pull growth in 2012 as a
whole over 2 percent. Such growth, though, is not typically enough to drive substantial
improvements in employment markets, and certainly not enough to push unemployment
down half a percent in two months. Yet, that isn’t necessarily cause to think that either the
employment or GDP figures are incorrect.
While nearly 80 percent of men in Japan participate in the
One potential cause is that productivity, which has increased through both the recession workforce, just 60.1 percent of women do. That percentage is growing
and the recovery, has reached a peak and employers are finding they can’t keep running and in a recent Goldman Sachs report, growth of female employment
with the same level of staff. The current level of economic growth has become less of a could grow GDP as much as 15 percent. The growth will also help to
temporary condition and more of the new normal. Managers can no longer count on staff make up for the loss of workers through Japan's aging population. Via
to continue working under emergency conditions, especially as corporate America BBC.
continues to see record profitability. Since the economy’s peak in October of 2007
corporate after tax profitability has grown at nearly three times the rate of GDP.
Brazil's unemployment reached record lows in September, the
most recent period available. Yet, economists project more rapid
growth in the coming year, perhaps as much as 4 percent growth after
growing just 0.5 and 1.6 percent in the first and second quart of 2012.
Via Bloomberg BusinessWeek
BLS Employment Situation Report: September 2012
Total unemployment in the U.S. fell, according to the Labor
Department, from 8.1 to 7.8 percent in September, while the economy
added 114,000 jobs.
Big data hiring makes big job openings
Energy sector to evolve in coming years
Legal field shows some signs of hiring improvements
Construction industry sees modest hiring increase, as struggles
continue
Since about 2008, the number of employees voluntarily leaving their jobs fell significantly
as people didn’t want to, or couldn’t change jobs at the rate they once did. The U.S. quit
rate fell as low as 1.2 percent in late 2009, but has since recovered to 1.6 percent. The
rate among workers who feel overworked or under-compensated is understandably even

2. higher.
“Even if a company isn’t cutting its staffing levels, it likely is losing employees to churn at a
higher rate today than they were two years ago,” says Romaine. “While though the
recession managers might have tried to cover those losses with existing staff, today
companies have reached a point where most positions vacated need to be backfilled. If a
salary lasted in the budget through the recession, it was a position worth keeping filled.”
If hiring is increasing, however, that could very well help add buying power to the economy
just in time for the holiday season, giving a possible boost to fourth quarter GDP.
The United Kingdom recently experienced a similar situation where employment was
growing while GDP was shrinking. The counter cyclical employment growth was puzzling
to many economist giving it names like 'the employment paradox' and the 'economic
puzzle.' Whatever the cause though, the increased employment likely helped to lift the UK
economy out of recession in the third quarter.
So whether the dog wags the tail, or the tail wags the dog, 2013 seems to be building the
potential for some upside surprise for both the economy and labor market.