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updated: 9/4/2014 9:59 AM

U.S. worker productivity up 2.3 percent in 2Q

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  • U.S. workers' productivity increased in the April-June quarter after a big decline in the first quarter while their labor costs edged down slightly.

      U.S. workers' productivity increased in the April-June quarter after a big decline in the first quarter while their labor costs edged down slightly.
    Associated Press

 
By MARTIN CRUTSINGER
AP Economics Writer

WASHINGTON -- U.S. workers' productivity increased in the April-June quarter after a big decline in the first quarter while their labor costs edged down slightly.

Productivity, the amount of output per hour of work, rose at a seasonally adjusted annual rate of 2.3 percent in the second quarter, the Labor Department reported Thursday. That represented a large rebound from the first quarter when productivity fell at a 4.5 percent rate. Unit labor costs edged down 0.1 percent at an annual rate in the second quarter, a significant moderation from an 11.6 percent surge in the first quarter.

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Gains in productivity mean workers can be paid more without worsening inflation.

The new estimates for productivity and labor costs were revised from initial estimates a month ago that productivity rose 2.5 percent in the second quarter and unit labor costs were up 0.6 percent.

The changes were based on revisions the government made in its initial estimate of overall economic output, as measured by the gross domestic product. The government last week estimated that the GDP grew at an annual rate of 4.2 percent in the spring quarter, a slight revision from its initial estimate of growth of 4 percent. Other factors such as hours worked and compensation costs also underwent revision between the first and second reports on productivity.

Greater productivity is the key factor determining rising living standards. It enables companies to pay their workers more without having to increase prices, which can boost inflation.

Over the past 12 months, labor costs have risen a modest 1.7 percent. That is well below the long-run average of 2.8 percent and suggests that wages and salaries are not rising fast enough to spur inflation. The Federal Reserve keeps close watch on productivity and labor costs for any signs that inflation may be accelerating.

In the past 12 months, productivity has increased just 1.1 percent, below the long-run average of 2.2 percent.

Productivity growth surged in 2009 and 2010 in the aftermath of the recession. Companies did trim output as demand plunged, but the job cuts came even faster, driving productivity higher as fewer workers did more. Productivity grew 3.2 percent in 2009 and 3.3 percent in 2010.

But in the past three years, productivity growth has averaged just 0.7 percent per year, which remains far below the norm. Economists are divided over whether that is a temporary stumble, or the new norm.

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