Welcome to the other side of the looking glass, folks. Three months ago, I showed you a picture of declining productivity in America. We were working more, producing less, and the productivity of the vaunted American workingman was dropping nearly 1% per year. This week, though, the news was all good (I mean, have you looked at the stock market recently?)

Part of yesterday's Dow Jones jump was surely due to the Fed squirting $600 billion worth of fiscal lighter fluid onto the fire. But I don't think the Bureau of Labor Statistics news hurt. Yesterday, BLS said industrial output-per-hour-worked increased 1.9% last quarter, while the cost of labor declined 0.1%. (Focus on the blue bars below.)

Of course, there are two sides to every mirror. Three months ago, I took accepted wisdom to task, and argued that when worker productivity declined, it meant the Great American Layoff had hit a point of diminishing returns. Megaemployers like Starbucks (Nasdaq: SBUX), Caterpillar (NYSE: CAT), and UPS (NYSE: UPS) had laid off so many workers that the ones left were too over-worked to work efficiently. It was time to start hiring again.

Where there's a whip, there's a way
The pictures up above seem to suggest that's no longer the case, that companies have somehow figured out how to squeeze even more blood from their turnip-shaped employees. But, that's not really the case. I know the "blue bars" are pretty, but if I might draw your attention to the little red dots instead ... what do you see there?

What I see is a clear trend in 2010: Output growing slower and slower relative to year-ago comparisons. Labor costs dropping by smaller and smaller increments. In short -- I see confirmation that we can no longer "do more with less." If American companies want the consumer to start shopping again, they're going to have to start cutting paychecks so we've got money to shop with.

The endgame begins
This morning, BLS confirmed that this is starting to happen, with "nonfarm payroll employment" rising by 151,000 persons in October. Supposedly, hiring strength is highest in the health care, retail, and professional, and business services. And indeed, here at the Motley Fool, we've been pleased to see that three of our own recommendations in these sectors, Intuitive Surgical (Nasdaq: ISRG), hhGregg (NYSE: HGG), and salesforce.com (NYSE: CRM), are indeed taking on new workers. Manufacturing remains a sore spot, with a net 7,000-job loss last month -- but even here, we've seen General Electric (NYSE: GE) make a major commitment to new hires in its appliances division.

Here's hoping there's more where that came from.

Got a contrary opinion? Don't keep it to yourself. Take the Foolish Rorschach test, and tell us what you see in the chart up above, down below.

Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy.

Salesforce.com and Intuitive Surgical are Motley Fool Rule Breakers recommendations. HHGregg and Starbucks are Motley Fool Stock Advisor choices. United Parcel Service is a Motley Fool Income Investor recommendation. The Fool has established a bear put spread position on Caterpillar. The Fool owns shares of United Parcel Service.

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