Labor Market Strength Is Also a Sign of Dysfunction
Job-hopping and rapid expansion has burdened businesses with high turnover and a poorly trained, overstressed workforce, which is holding back productivity.
Too much of a good thing.
Photographer: Oliviier Douliery/AFP
The biggest puzzle in the US economy this year has been two straight quarters of negative real economic growth accompanied by booming job growth. As a result, on a year-over-year basis, workforce productivity growth has been historically bad. There's plenty of reasons for this following two weird pandemic years, but an underexplored cause is that the strong labor market has led to too much turnover in the workplace, creating disruptions and unpredictability for businesses. A softer labor market would be better for workers, employers and consumers alike.
In the first six months of the year, the total number of hours worked by Americans grew at a 2.5% annualized rate, with employment growing by 2.7 million workers. Ordinarily, with that kind of growth in total hours worked you'd expect real gross domestic product growth of 4% or so — 2.5% growth in hours and 1.5% productivity growth, assuming workers became more productive at roughly the same pace as in the 2010's.