The Labor Department figures showed that the length of the average workweek for all employees in April was 34.5 hours. That was unchanged from March, when the workweek shrank for the first time in more than a year and employment grew the least since June 2012. From October through February, it had lingered at a more than six-year high at the same time hiring picked up.
Because productivity is a measure of how much stuff workers can churn out per hour, a stabilized, shorter workweek could be a sign that employers are trying to shore up their output stats, according to economists at JPMorgan Chase & Co.
This suggests “that some improvement in supply-side performance may be coming,” economists Bruce Kasman and David Hensley wrote in a May 8 note to clients.
Neil Dutta, head of U.S. economics at Renaissance Macro Research LLC in New York, agrees. The figures showing the workweek didn’t recoup all of its March losses add to evidence that “firms are trying to re-establish a bit more productivity,” he said. “We’ll see how the data unfolds in subsequent quarters.”
Of course, this also could be an indicator that demand for companies’ goods and services is weakening, according to Omair Sharif, a rates sales strategist at Societe Generale in New York. Companies normally try to improve productivity through investment, such as better equipment, he said.
“If they’re cutting hours, then sure, productivity will rise if output is the same and you are able to squeeze more out of each worker,” he said in an e-mail. “But cutting hours is more a sign of slackening demand, in my opinion.”
Productivity fell an annualized 1.9 percent in the first quarter from the prior three months after a 2.1 percent drop at the end of last year, marking the biggest back-to-back decline since 1993.
Companies’ attempts to boost their output efficiency don’t always translate into immediate gains for workers. It could result in more moderate employment increases, especially compared to the rapid pace of improvement in the second half of last year. The U.S. already has seen that happen to some extent, with payrolls climbing by 223,000 in April, compared to a six-month average of 254,500.
Still, a slower pace of payrolls growth might not be a bad thing, said Kathy Bostjancic, a U.S. financial economist at Oxford Economics USA Inc. in New York.
“A better mix of growth would be to see employment slow, but productivity growth pick up,” she said. Job gains at a more sustainable, though strong, level should be expected in the future, she said.