The top chart above shows that real GDP in the fourth quarter of 2010 was slightly higher (by 0.14%) than real output in the fourth quarter of 2007 when the recession started. But even though the economy has made a complete recovery from the Great Recession in terms of real economic output, the U.S. economy is producing more real GDP today than in 2007 with 7.3 million fewer private sector jobs. This current economic recovery is an amazing story of huge increases in worker productivity (producing more output today with 6.3% fewer private sector workers than in 2007) that might be unprecedented in U.S. history over any three year period of time, or in any post-recession period.
What does that surge in worker productivity mean for the bottom lines of American companies? The bottom chart above shows that real corporate profits per private sector job reached an all-time record historical high of $11,552 in the fourth quarter of 2010 (measured in 2010 dollars). That's 65% higher than the recession-low of about $7,000 per worker in fourth quarter of 2008 and 7.5% above the pre-recession high of $10,740 in 2006.
That's the good news about record-high worker productivity and the resulting record-high real corporate profits per private sector worker. The bad news is that these trends might translate into a record-length "jobless recovery," as U.S. companies have been able to expand output and profits to record levels, but with millions and millions of fewer workers. Taken together, these two trends might explain why many companies have been reluctant to hire back more workers - why increase the labor force when output and profits are at record-levels?
A recent AP news report discusses these trends:
U.S. workers have become so productive that it's harder for anyone without a job to get one. Companies are producing and profiting more than when the recession began, despite fewer workers. They're hiring again, but not fast enough to replace most of the 7.5 million jobs lost since the recession began.
Measured in growth, the American economy has outperformed those of Britain, France, Germany, Italy and Japan — every Group of 7 developed nation except Canada, according to The Associated Press' new Global Economy Tracker, a quarterly analysis of 22 countries representing more than 80 percent of global output.
Yet the U.S. job market remains the group's weakest. U.S. employment bottomed and started growing again a year ago, but there are still 5.4 percent fewer American jobs than in December 2007. That's a much sharper drop than in any other G-7 country. The U.S. had the G-7's highest unemployment rate as of December. Canada and Germany have actually added jobs since the recession ended in June 2009.
Panicked by the 2008 financial crisis and deepening recession, U.S. employers cut jobs pitilessly. They slashed an average of 780,000 jobs a month in the January-March quarter of 2009. "My sense is there was much more weeding out of the weakest workers — the ones they didn't want," says Harvard economist Kenneth Rogoff.
Yet after shrinking payrolls, many companies found they could produce just as much with fewer workers. And with that higher productivity came higher profits. By July-September quarter of 2010, U.S. corporate earnings were 12 percent more than when the recession began. By contrast, corporate profits fell 6 percent in Japan and 16 percent in Canada from the October-December quarter of 2007.