The longest stretch of productivity declines since the end of the 1970s is threatening to restrain US worker pay and broader economic growth in the years ahead.
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American workers’ productivity slipped in the April-June quarter, feeding into a 12-month decline in how much people are producing for each hour worked. The median forecast in a Bloomberg survey called for a 0.4 per cent gain. Expenses per worker climbed at a 2 per cent pace after being revised to a decline in the previous period.
Productivity compared with a year earlier fell for the first time since 2013 as lackluster global markets prompted companies to scale back capital investment plans.
“However, we do not believe this can last, because strong hiring in the face of weak productivity necessarily implies a further deterioration in corporate profit margins”. Economists surveyed by MarketWatch had forecast a 0.3% gain in productivity in the quarter.
The report showed that productivity fell by 0.5 percent in the second quarter after sliding by 0.6 percent in the first quarter. In the prior quarter, they were revised to a 0.2 per cent decrease from an initially reported 4.5 per cent advance.
USA labour productivity fell for a third consecutive quarter over the three months ending in June, pressuring labour costs higher despite slower wage growth, although inflationary pressures eased substantially, leaving economists divided on the implications of the data for monetary policy.
Productivity has dropped 0.4 percent from a year ago, as labor costs and the hours worked are rising faster than the output of workers’ goods and services.
America’s nonfarm productivity unexpectedly stayed in contraction during the second quarter, despite an increase in labor-related production costs.
Output per worker in the second quarter increased at a 1.2 percent rate, up from the 0.7 percent pace notched in the January-March period. The economy expanded at a 1.2 per cent annualized rate, according to Commerce Department data released July 29.
Amid fragile global growth prospects and USA presidential election year uncertainty, the risk is that business investment continues to languish.
Some of the weakness has come from the mining industry.
On a more positive note, revisions to data going back to 2014 showed that productivity grew by 0.9% in 2015 and not 0.7%.
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