Supply Chain Managers Must Continue to Deal With Modest Gains in Productivity

Despite all the fears over the fiscal cliff, employers added an average of 201,000 jobs per month, compared with 152,000 in the third quarter. Real GDP contracted, however, in part due to massive but temporary corrections in defense spending and inventories.
By Patrick Burnson, Executive Editor
February 11, 2013 - SCMR Editorial

In its preliminary fourth quarter “Report on Productivity and Labor Costs,” IHS Global Insight U.S. economists suggest that both hiring and productivity will move upward…but at a snail’s pace.

“The expiry of the payroll tax cut and other headwinds have left further acceleration in employment growth over the next few months unlikely,” said economist, Erik Johnson. “But the underlying fundamentals in the economy are trending upward, and 2013’s employment growth should at least match 2012’s.”


As expected, nonfarm labor productivity declined by 2.0% in the fourth quarter. Nonfarm business output grew by just 0.1% annualized, the worst showing in nearly two years, even as employee hours were up 2.2% over the previous quarter. Year-on-year, productivity growth was just 0.6%, the slowest pace of 2012. For 2012 overall, productivity growth was 1.0%, compared with 0.7% in 2011 and 3.1% in 2010.

After two quarters in which hiring lagged behind output growth, the tables turned in the fourth quarter. Despite all the fears over the fiscal cliff, employers added an average of 201,000 jobs per month, compared with 152,000 in the third quarter. Real GDP contracted, however, in part due to massive but temporary corrections in defense spending and inventories.

Coming out of the recession, companies slashed payrolls and worked their existing employees to the bone – this would explain the strong productivity figures we saw in 2009 (3.0%) and 2010 (3.1%). But firms have squeezed about as much as they can out of their workforces and have resorted to hiring more in order to raise output. Thus, productivity growth has been relatively muted over the past two years.

“With fiscal concerns lingering and foreign growth issues persisting, we expect both output and hiring to trend up modestly,” said Johnson. “We expect a first-quarter rebound in output growth and gradual improvement thereafter. The result: productivity should grow around 0.5% in 2013 and drift up slowly, but it will be years before productivity returns to its long-term trend rate of 2%.”



About the Author

image
Patrick Burnson
Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).

Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

United States Class I carloads were down 56,104 carloads–or 4.6 percent annually–at 1,115,957 in August, and intermodal containers and trailers were up 3.6 percent--or 38,617 units- at 1,114,370.

A new report from Chicago-based freight transportation and logistics consultancy CarrierDirect released this week examines current freight market conditions and what logistics and supply chain stakeholders need to do and know in order to stay one step ahead of the competition.

You’ve heard the old saying, it was the best of times, it was the worst of times. Rob Handfield sees this as the best of times for procurement professionals, who have an opportunity to deliver real value to their organizations

While core metrics were down from a very impressive July, the August edition of the Non-Manufacturing Report on Business from the Institute of Supply Management (ISM) was still very strong.

The Clean Cargo Working Group (CCWG) has released a report indicating that in 2014 average CO2 emissions in the global container shipping trades declined 8.4 percent from the year before.

Article Topics

News · Global · Economy · Labor · All topics

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review. Patrick covers international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. Contact Patrick Burnson

Comments

Post a comment
Commenting is not available in this channel entry.