US productivity growth rebounds to 1.3 pct. in 2nd quarter

Over the last four quarters, manufacturing productivity increased 1.1 percent, as output increased 2.3 percent and hours increased 1.2 percent. Also year over year, output was up 2.8% and hours worked was up 2.6%.

And productivity growth was even weaker in 2012 and 2013 than previously thought.

Compensation was previously reported to have increased at a 3.3 percent rate in the first quarter. 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.

U.S. productivity in the second quarter rose by a 1.3% annual pace after two straight negative quarters. Unit labor costs rose 2.1 percent compared to the second quarter of 2014. Economists expected growth of 1.6%.

Productivity data can be volatile from quarter to quarter and are often heavily revised. This was true despite an increase in output of 2.8 percent since the second quarter of 2014. For example, productivity was flat in 2013.

WASHINGTON – US nonfarm productivity rebounded in the second quarter, but a weak underlying trend suggested inflation could pick up more quickly than economists have anticipated.

Productivity in 2013 was especially weak, revised down to unchanged from the prior estimate of a 0.9% gain.

Hours worked climbed by 1.5 percent in the second quarter following a 1.6 percent increase in the previous quarter.

The data “means that potential growth is sharply lower than where most economists were assuming”, said Amherst Pierpont Securities economist Stephen Stanley. The decline in productivity in the first quarter was revised up slightly to a negative 1.1% from the prior estimate of 3.1%.

The heyday of worker productivity in the U.S. may have passed.

Joel Naroff, president of Naroff Economic Advisors, said productivity is low because workers have learned that in this expansion working harder doesn’t get them anything in return.

“The most important factor determining continued advances in living standards is productivity growth”, Federal Reserve Chairwoman Janet Yellen said in a speech last month. On the ULC [unit labor costs] side, the big downward revision is the result of a modest upward revision to the hourly cost of labor and a very large upward revision to the amount of output that is generated by this labor (thus, more output per dollar spent on labor).

Fed policy makers are closely watching measures of the labor market as they consider raising short-term interest rates for the first time since 2006.

Another report Tuesday showed warehouses at U.S. wholesalers are filling to the brim as sales cool.