The 1.7 million workers hired in the first quarter produced negative output

Total number of workers increased by 1.7 million in the first quarter of this year, yet total output fell by 1.4%.

Initially, the number released for economic activity in the first quarter of this year did not make sense. Total employment increased by nearly 1.7 million workers, yet total output declined. How is that possible?

It is possible because, after the productivity numbers were released, it was revealed that newly hired workers not only didn’t add any output, they actually caused output to decline.

Historically, when the economy is growing at an annual rate of 2% to 3%, about 200,000 jobs are added each month. Last year the economy grew at a 5.7% rate, and the economy added more than 500,000 jobs per month.

In January, February and March of this year, almost 600,000 jobs were added monthly. Most economists expected a 3% growth rate for those months. Economists were shocked when the reported growth was negative. The Commerce Department reported the annual growth rate for the quarter was -1.4%.

Adding that many jobs with total output declining simply did not make sense, at least not until the productivity number was released. Productivity decreased by 7 1/2%. Now the numbers do make sense, but the…