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Some hope for workers Eventually, productivity and profit gains must translate into more jobs and wages

The good news about rising productivity contains a kernel of hard truth which, if things go well, should sprout into very good news indeed. So it goes as the nation gropes along the tortuous path to economic recovery.

New numbers from the federal Labor Department show workers' productivity and business profits climbed this spring, offering evidence that the economy is improving. But the improvement was borne on suffering. Productivity rose in large part because businesses shed workers. With fewer employees doing the same work, the productivity of each increased.

Unfortunately, but necessarily, that is also how profits rose. By cutting labor expenses through job reductions and cuts in wages and benefits, businesses were able to bolster their bottom lines, even in the face of consumers' reluctance to open their wallets.

Still, the numbers show matters moving in the right direction. Productivity rose at an annual rate of 6.6 percent, the biggest improvement in six years, and a little better than the 6.4 percent rate that the government had forecast. Labor costs, meanwhile, fell by 5.9 percent, the steepest decline since 2000 and a little higher than the 5.8 percent drop that had been predicted.

So, from the view of business, matters have at least stabilized, if not improved. But from the perspective of employees -- and, hence, consumers -- they have not. Now is when matters become more difficult.

Because consumers haven't flocked back to the stores, businesses are going to have a difficult time maintaining those profit margins. They have already cut the labor costs and, while some companies may seek to make further reductions, most have already done what they can. That leaves them with the challenge of increasing revenue at a time when consumers don't want to spend.

Now, the economy needs a bridge. With economists declaring that the recession is at or near its end, the key will be for business to start hiring. That will begin a new upswing. More money will enter the economy and more consumers will feel safe about spending money on cars, homes, refrigerators and other big-ticket items that power the economy.
That's not happening yet. On Friday, the government reported that unemployment jumped half a percentage point, reaching 9.7 percent in August, the highest rate since 1983. Again, the rate rose more than the government's forecast of 9.5 percent. The rate of increase has slowed, but some observers say unemployment will break the 10 percent barrier before retreating.
Still, we can go only forward. This is a difficult Labor Day, but we are starting to put this daunting challenge behind us. Few people are worried now that the economy -- indeed, the entire financial infrastructure -- is threatened with collapse. If things still seem unsettled, that's because they are. But they are better than they were and we are moving, however clumsily, in the right direction.

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