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Illustration: Aïda Amer/Axios

Wednesday's productivity report is the latest sign that historically low U.S. unemployment may be indicating a sick, rather than a healthy economy.

What's happening: As uncertainty has increased over the U.S-China trade war and other geopolitical events, companies that have the capacity to invest in new equipment, technology or factories are holding off and hiring workers to pick up extra slack instead.

Why that's bad: The increase in hiring is less about expansion or optimism than the fact that workers are a cheaper investment, and one that is easier to reverse should the economy go south.

  • "If the economy improves, that’s great, you’ve got more workers; if we do have a recession, then you have the flexibility of deciding whether you need to lay off some workers," Bernard Baumohl, chief global economist at The Economic Outlook Group, tells Axios.
  • "At that point, you’re treating workers as inventory."

By the numbers: This story of hiring as uncertainty insurance is borne out in the data, experts say.

  • U.S. real output per hour, seen as the standard measure of worker productivity, fell by 0.3% in the third quarter from the second, marking its first quarterly decline in almost four years.
  • Similarly, the latest U.S. GDP report showed business investment had declined for the second quarter in a row, falling by 3% from the quarter before.

Why it matters: Productivity is the secret sauce to economic growth, and the U.S. has had underwhelming productivity growth for the last 15 years — a full 1% below the pace of annual growth in the 15 years prior.

  • Further declines could weigh seriously on already slowing GDP.

Threat level: A basic way to measure productivity is, "Do you give workers more tools?" David Kelly, chief global strategist at JPMorgan Asset Management, tells Axios. "We're actually increasing the number of workers and decreasing the number of tools in the last two quarters. That doesn't bode well."

Yes, but: Experts also remain bullish on a positive outcome to the trade war and other uncertainties clouding the economic outlook.

  • Further, the rising wages of Americans — and the increasing trouble businesses are having finding qualified people to hire — may force corporate America's hand.

The last word: "If freedom is just another word for having nothing left to lose, then productivity is just another word for having no one left to hire," Kelly says.

Go deeper

House passes $1.9 trillion COVID relief package

Photo: Screenshot via C-SPAN

The House approved President Biden's $1.9 trillion COVID relief package on a 219-212 vote early Saturday morning, sending it to the Senate for a possible rewrite before it gets to Biden's desk.

The big picture: The vote was a critical first step for the package, which includes $1,400 cash payments for many Americans, a national vaccination program, ramped-up COVID testing and contact tracing, state and local funding and money to help schools reopen.

7 hours ago - Health

Biden says it's "not the time to relax" after touring vaccination site

President Biden speaking after visiting a FEMA Covid-19 vaccination facility in Houston on Feb. 26. Photo: Mandel Ngan/AFP via Getty Images

President Biden said Friday that "it's not the time to relax" coronavirus mitigation efforts and warned that the number of cases and hospitalizations could rise again as new variants of the virus emerge.

Why it matters: Biden, who made the remarks after touring a vaccination site in Houston, echoed CDC director Rochelle Walensky, who said earlier on Friday that while the U.S. has seen a recent drop in cases and hospitalizations, "these declines follow the highest peak we have experienced in the pandemic."

Updated 7 hours ago - Politics & Policy

Coronavirus dashboard

Illustration: Annelise Capossela/Axios

  1. Health: Most COVID-19 survivors can weather risk of reinfection, study says — "Twindemic" averted as flu reports plummet amid coronavirus crisis
  2. Vaccine: FDA advisory panel endorses J&J COVID vaccine for emergency use — About 20% of U.S. adults have received first vaccine dose, White House says — New data reignites the debate over coronavirus vaccine strategy.
  3. Economy: What's really going on with the labor market.
  4. Local: All adult Minnesotans will likely be eligible for COVID-19 vaccine by summer — Another wealthy Florida community receives special access to COVID-19 vaccine.
  5. Sports: Poll weighs impact of athlete vaccination.