Saturday, January 29, 2011

GDP is back to Pre-Recession Level!! Why has the unemployment rate not followed suit? Is a hiring binge around the corner?

The latest report on Gross Domestic Product (GDP) released on Friday shows the US economy is back to the pre-recession level of Real GDP.  See graph below.  However, the unemployment rate of 9.4%  has barely budged in sometime. We are producing the same amount of GDP with millions fewer workers in a span of 2-3 years.  Will there be an unleashing of hiring in the coming months? If demand for goods and services remains strong AND if the productivity per worker declines as a result of this increase in demand, then businesses will have to assess whether their current workers are over-worked to the point where it is counter productive to NOT hire additional workers to help with production. OR they will substitute capital (Technology) for labor and the road will remain difficult for workers at the margin. The beat goes on...

Source: Carpe Diem

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