The Labor Department says worker productivity increased at a seasonally adjusted annual rate of 1.3 per cent, up from a drop of 1.1 per cent in the first quarter.
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The annual gain is well below the long-term average of 2.2% a year since the end of World War II. Unit-labor costs, meanwhile, rose by a 0.5% annual rate in the second quarter after a 2.3% rise in the first three months of the year.
“This topic is still getting nearly no attention – particularly among presidential candidates – but there is a case to be made that the stagnation in productivity has been more damaging to the living standards of Americans than the Great Recession”, Ashworth said.
Productivity in 2013 was especially weak, revised down to unchanged from the prior estimate of a 0.9% gain. The downward revisions suggested the economy’s growth potential could be lower than the 1.5 per cent to 2.0 per cent pace that economists have been estimating. The Labor Department releases second-quarter productivity data on Tuesday, August 11, 2015. The increased productivity in the second quarter was a result of output increasing at a 2.8% pace and hours worked rising 1.5%. This measure of efficiency, dubbed “total factor productivity”, is a key metric of innovation, and research firm Macroeconomic Advisers reckons that, post-revision, it may not be growing at all, vs. 0.4% a year in the unrevised data. If productivity is weak, businesses need to employ more workers to raise production, which can add to inflation pressure. That is the weakest showing since 1982. In 2012, productivity growth was revised down to 0.9 percent from 1 percent. Unit labour costs rose 2.1% compared with the second quarter of 2014. For wages to increase, workers may need to become more productive.
Yet productivity has slowed markedly in the past four years, a trend that has puzzled economists.
The modest increase in labor costs came as hourly compensation increased by 1.8% in the second quarter after rising by 1.1% in the first quarter.
Some experts believe that improvements in software and other high-tech products aren’t being accurately measured by the government’s statistics, which were formulated when manufacturing, agriculture and other tangible goods accounted for a bigger share of the economy.
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They were previously reported to have increased at a 6.7 percent rate in the January-March period. Unit labor costs in the first quarter were revised lower to 2.3% from a prior reading of 6.7%. It allows employers to boost wages and salaries without having to increase prices and potentially spark inflation. And still others point out that companies have been reluctant since the recession to invest in large equipment such as industrial machinery, which could boost their employees’ productivity.
