Productivity growth declines

May 7, 2010 at 12:00a.m.

Associated Press

WASHINGTON

Companies are reaching a point where they no longer can squeeze more work out of leaner staffs, normally a sign that a hiring rebound could be near. But the growing European debt crisis is unsettling the global economy and may affect employers’ hiring plans.

U.S. productivity grew at an annual rate of 3.6 percent in the first quarter, down sharply from the previous three quarters. Analysts predict productivity, the amount of output per hour of work, will slow even further.

“Companies are close to the limits of what they can do with their existing staff. They are going to have to start rehiring people,” said Nigel Gault, chief U.S. economist at IHS Global Insight.

But fears that Greece’s debt problems could spread to other countries sent Wall Street into a free fall Thursday.

If the crisis drags on, it could leave employers less confident about the economy.

The job market is showing gradual improvement, according to a second Labor report. Applications for unemployment benefits dropped for a third-straight week, decreasing by 7,000 to 444,000.

Still, economists predict the April jobless number, to be released today, will show unemployment stuck at 9.7 percent for a fourth-straight month.