Are Businesses Too Productive?

Maybe increasing productivity is causing the jobless recovery.

Other chip plants need about 400 employees at all times to operate the complex machinery. But today at East Fishkill, 100 engineers per shift oversee a totally automated production line, solving problems and generally keeping their distance from the real work. Last winter, when a fierce snowstorm sent everyone home early, the machines didn't even notice and hummed along overnight without a glitch. "The productivity increases for IBM are amazing," says Perry Hartswick, the senior program manager at the plant.
Productivity improvements like those at IBM are a boon in a healthy economy, helping to make American business more competitive abroad and keeping a lid on inflation as employees work harder to meet strong demand for their products. But economists have a knack for spotting the downside of any trend (it's called the dismal science for a reason), and sure enough, today's soaring productivity is having a harmful side effect: it's holding back job growth in an economy that's finally growing again, albeit slowly. Last Thursday, the Commerce Department reported that GDP grew at a respectable annual rate of 2.4 percent, fueled in large part by spending for the war in Iraq. But tell that to the 9.1 million Americans who are out of work. They probably paid more attention to Friday's new stats: unemployment was hovering at an uncomfortably high 6.2 percent in July, and 44,000 additional jobs were axed from payrolls, marking the sixth month in a row the economy has lost jobs.

I can't wait to see how the politicians handle this one.

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