Tags: productivity | economy | workers | labor

Productivity Recovers After Steep First-Quarter Fall

Friday, 08 August 2014 08:41 AM

U.S. nonfarm productivity rebounded more strongly than expected in the second quarter, but a sharp slowdown in unit labor costs pointed to still-tame wage pressures that could give the Federal Reserve room to keep interest rates low for a while.

The Labor Department said on Friday productivity increased at a 2.5 percent annual rate after contracting at a revised 4.5 percent pace in the first quarter, which was the fastest decline since the fourth quarter of 1981.

Productivity, which measures hourly output per worker, was previously reported to have declined at a 3.2 percent rate in the first three months of the year.

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Economists had forecast productivity rising at a 1.5 percent rate in the April-June period.

The rebound in productivity follows a bounce back in gross domestic product in the second quarter. The economy grew at a 4.0 percent rate after shrinking at a 2.1 percent pace in the first quarter.

The trend in productivity, however, remains sluggish. Compared to the second quarter of 2013, productivity increased 1.2 percent.

Workers put in more hours in the second quarter, but with output rising, that lowered labor costs.

Unit labor costs, the price of labor per single unit of output, rose at a 0.6 percent rate after advancing at a revised 11.8 percent rate, which was the quickest since the fourth quarter of 2012.

The Fed is keeping an eye on wage growth as it ponders the future course of monetary policy.

While the tame unit labor costs suggest the U.S. central bank should be in no hurry to start raising its benchmark overnight interest rate, which it has kept near zero since December 2008, other measures such as income and the employment cost index point to some firming of wage pressures.

In addition, there is growing anecdotal evidence that companies are raising wages. A compensation gauge produced by the National Federation for Independent Business is hovering at a seven-year high.

Unit labor costs were previously reported to have increased at a 5.7 percent rate in the first quarter and economists had expected them to rise at a 1.4 percent pace in the second quarter.

Compared to the second quarter of last year, unit labor costs rose 1.9 percent, showing that wage inflation remained benign. They had increased 2.6 percent in the first quarter.

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U.S. workers were more productive in the April-June quarter and labor costs rose slightly, a sharp turnaround from grim first-quarter figures.The Labor Department says that productivity increased 2.5 percent at a seasonally adjusted annual rate, after plummeting 4.5 percent...
productivity, economy, workers, labor
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2014-41-08
Friday, 08 August 2014 08:41 AM
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