Productivity gains to bring more jobs for unemployed.

IF you're unemployed and ready to pack it in because everything you read suggests strong productivity growth is the enemy, help is on the way.

Higher productivity growth, stronger corporate profits and stronger employment growth actually go hand in hand--sometimes with a long and variable lag, as this business cycle is proving.

The acceleration in U.S. labor productivity, which rose 4.1 percent in the four quarters ended in the second quarter, is not about to upend the expansion either.

Think about it this way: If businesses were to postpone efficiency--and profit-enhancing initiatives for the sake of the status quo (think Old Europe), profits would suffer--and so would labor compensation.

"Real labor compensation tracks real productivity growth," said Jim Glassman, senior U.S. economist at J.P. Morgan Chase & Co. "Real compensation gains are entirely consistent with rising profits."

In fact, says Glassman, the tip-off that productivity was accelerating in the mid 1990s--ignored or dismissed at the time--was the simultaneous rise in profit margins and real compensation.

How does productivity provide all things to all people? Let's start with the basics.

Labor productivity is defined as real output per worker hour. Productivity increases when companies produce the same amount, or more, with less. Since labor is the biggest input, even in goods production, companies achieve greater efficiency initially at the expense of labor.

That's how it always works. For the folks who get laid off in a cost-cutting sweep by business, life is tough. For the rest of us--and eventually for the unemployed who get rehired--productivity brings unqualified benefits.

Higher productivity translates into higher profits, higher wages and lower prices. And it provides a higher standard of living for all.

The benefits of increased productivity--often the result of investment in new technologies--first show up in a company's bottom line. That's what's been going on in the last few quarters. Businesses have restored pretax profits as a larger share of GDP.

In a competitive, free-market system, companies can't hoard all the profits. Enhanced efficiency encourages some companies to cut prices to increase market share. The rest follow.

That's one way higher productivity yields higher real wages: Lower prices mean workers' wages buy more. At the same time, if an employer doesn't raise the worker's pay to match the marginal value of her product, another company will. Either way, real wages rise.

Those who argue that stronger productivity growth is hampering hiring sufficiently to doom the expansion haven't looked at history. While no cycle is the same, the expansions with the strongest rebound in productivity growth saw the strongest hiring. The recovery from the business cycle troughs in 1970, 1975 and 1982 all bear this out.

The truth is, the amount of work is not fixed. New jobs and industries are created, just as old ones die off or move offshore. Structural changes in the economy--the transition from an agrarian to an industrial economy, from a goods-producing to a service-producing one--cause an evolution in the labor market.

The whole process is what the late Austrian economist Joseph Schumpeter called creative destruction. In the short run, the closing of a factory and loss of a job is devastating to workers. In the long run, those workers get retrained, relocate or are absorbed by employers in search of a readily available labor pool.

For those who worry that a lack of job growth is jeopardizing the expansion, consider the alternative. Construction companies could get rid of their big earthmoving equipment and instead hire a lot of new workers and buy them all shovels.

Caroline Baum is a columnist for Bloomberg News.