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

Updated 24 mins ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 7 a.m. ET: 30,804,120 — Total deaths: 957,348— Total recoveries: 21,062,785Map.
  2. U.S.: Total confirmed cases as of 7 a.m. ET: 6,766,631 — Total deaths: 199,268 — Total recoveries: 2,577,446 — Total tests: 94,211,463Map.
  3. Education: What we overlooked in the switch to remote learning
  4. Politics: In reversal, CDC again recommends coronavirus testing for asymptomatic people.
  5. Health: The dwindling chances of eliminating COVID-19.
  6. World: Guatemalan president tests positive for COVID-19 — The countries painting their pandemic recoveries green.

What we overlooked in the switch to remote learning

Illustration: Eniola Odetunde/Axios

America’s rapid and urgent transition to online school has come with a host of unforeseen consequences that are only getting worse as it continues into the fall.

The big picture: The issues range from data privacy to plagiarism, and schools are ill-equipped to deal with them, experts say.

The positions of key GOP senators on replacing Ruth Bader Ginsburg

Senate Majority Leader Mitch McConnell talks to reporters on Capitol Hill last Thursday. Photo: Chip Somodevilla/Getty Images

With President Trump planning to nominate his third Supreme Court justice nominee by next week, key Republican senators are indicating their stance on replacing the late Justice Ruth Bader Ginsburg just over six weeks out from Election Day.

The big picture: Senate Majority Leader Mitch McConnell (Ky.) has vowed that "Trump’s nominee will receive a vote on the floor of the United States Senate." But Sen. Lisa Murkowski (Alaska) told Alaska Public Media, "I would not vote to confirm a Supreme Court nominee. We are 50 some days away from an election."