American productivity increased during the summer of coronavirus shutdowns, but that’s not entirely a good thing on a day that celebrates labor.
The 10.1% boost in the April-June quarter, according to revised figures the government released last week, has come at the expense of jobs. The basic formula that determines productivity, at heart a division of the gross domestic product by hours worked, means it can show positive growth when time spent on the job declines. And in the second quarter, the number of hours worked dropped by the largest amount in more than 70 years.
“It’s a perverse situation,” said Sam Bowman, a senior fellow at the International Center for Law and Economics.
With the most productive people working more, businesses have managed in many cases to maintain output, and so while Labor Day may be bleak for the 13.6 million unemployed Americans, the overall economy appears to be weathering the storm.
“Sadly, not cause for celebration, of course — in times like this, when unemployment is rising and hopefully falling, soon so rapidly — total output is probably the best measure of how much we are producing rather than productivity per hour worked,” Mr. Bowman said.
He offered that assessment hours before the August unemployment report was released Friday, and in fact the unemployment rate did drop to 8.4%. With new jobless claims falling below one million and manufacturing production hitting a two-year high in August, the economy has shown promising signs of rebound.
The COVID-19 whammy may have led to some other positive developments in terms of productivity, although they aren’t the developments that are easily captured by economic spreadsheets, according to some experts.
In particular, the revolutionary changes in work, with millions more working at home and offices largely empty in many places, particularly cities, have led to a sea change in managerial approaches, said Jay Jamrog, a co-founder of the Institute for Corporate Productivity.
“It was a sudden thing when offices got shut down and there’s a period of confusion, and productivity gets hurt the first few weeks,” Mr. Jamrog said.
April was the cruelest month for actual work, with the Institute for Corporate Productivity saying its polling seemed catastrophic. In its survey of 518 human-resources decision makers from a mix of global, multinational and U.S.-based organizations, 96% said productivity had taken a major hit because of the coronavirus.
The productivity sky did not fall, however.
“But after the first month and a lot of talk about productivity, the people got around to saying ‘it’s not the hours worked but what they are producing,” Mr. Jamrog said. “Managers started seeing their people as human beings, as managers became more human and adapted, they became more empathetic and inclusive and really started worrying about the well-being of their employees,” he said.
Mr. Jamrog said he has seen genuine evidence of that among the more than 200 Fortune 1,000 companies that are members of his group.
“This is not just happy talk,” he said.
One of the key questions is how productive workers are at home, but the novelty of so many people laboring from their home offices means economists have not developed all the tools to measure it.
Thus far, the data that is available seems promising.
For example, there have been major gains in terms of time saved commuting, which has extended the workday.
A Sept. 1 survey by CoPilot showed that, prior to COVID-19, workers spent an average of 4.5 hours per week commuting, most of them in cars, which sharply limited their ability to multitask. That means, the company concluded, “newly remote workers nationwide have gained an average of 10.4% of their work week back.”
Unsurprisingly, the gains were biggest in the biggest cities, with Miami and the Washington area clawing back more than 11% of their week. Chicago and Philadelphia workers gained 13% or more, while New Yorkers topped the list at 15%.
The downsides, however, include the intrusions of increased childcare and supervising kids doing virtual learning.
While the situation is anecdotal for now, those trying to assess the new normal are hopeful.
“We are positively impressed with the productivity trends and employee resiliency as they juggle home and work when armed with proper technology,” said Bill Hewitt, president and CEO of Aternity, a digital experience management company in Cambridge, Massachusetts. Business leaders have recognized that they don’t need to look over employees’ shoulders to ensure productivity.”
The question of productivity was one top economists were wrestling with before COVID-19 infected its first victim in Wuhan, China, last year, said Matthew Russell, who heads the Bureau of Labor Statistics’ major-sector productivity group.
Productivity surged between 2000 and 2007, and it has never regained that sort of mojo since the Great Recession hit in 2008, Mr. Russell said.
“They even called it a ‘jobless recovery’ back then, and since 2009 it has really slowed remarkably,” he said.
A number of theories have been suggested for why that has happened.
One theory holds that the boom at the beginning of the 21st century reflected massive spending on technological infrastructure, a phenomenon that “showed up as a one-time boost and then dropped off,” Mr. Russell said.
That spending is paying off now, as the virus has forced more businesses into teleconferencing, Zoom meetings and the like. The shift has probably had the biggest impact on “knowledge based” workers who often benefit from interaction and discussion with colleagues, experts said.
Mr. Jamrog said human resource executives report many workers feel more connected and included now, as they are often involved in meetings with co-workers online that they may not have been in the office.
As these newfangled kinds of collaboration have become more prevalent, they have reinforced the premium businesses must place on technology, Mr. Hewitt said.
“Not all apps deliver the same performance at home as in the office,” he said. “For industries that depend heavily on collaboration and productivity apps like professional services, legal, communications, productivity is about the same, but for industries that rely on data-extensive apps like manufacturing and biotech [they] can experience a 50% ‘productivity tax,’” he said.
The estimates underscore the novelty and hence the uncertainty as to how permanent or widespread the shift to remote working may prove.
The overall productivity figures are likely to increase because of the same perverse mechanism Mr. Bowman referenced.
“Historically, economic recoveries have been accompanied by a surge in productivity due to workforce reductions — the COVID-19 recovery could see the same trend,” JPMorgan Chase wrote in a bulletin at the end of August. “During the last recession, between 2007 and 2010, worker productivity jumped 7% — the fastest increase in two decades.”
Mr. Jamrog, who identifies himself as a futurist, said the ripples of coronavirus have him stumped, but not overly gloomy.
“It’s chaos out there,” he said. We are very much in an era where we don’t know what will happen, but I don’t think we’ll ever go back to living, working and playing like we did.”