U.S. Labor Productivity Rebounds Less Than Expected In Q2

Productivity was up at a 1.3% annual rate in Q2, just below expectations, though a steep 3.1% plunge in Q1 was revised to -1.1%.

Productivity increased at a 1.3 percent annual rate in the April-June period, the Labor Department said on Tuesday.

Compared to the same quarter a year ago, productivity edged up by 0.3 percent in the second quarter, as output climbed by 2.8 percent and hours worked increased by 2.6 percent. The increased productivity in the second quarter was a result of output increasing at a 2.8% pace and hours worked rising 1.5%.

Inventories at distributors jumped 0.9 percent in June, the biggest gain since April 2014, after rising 0.6 percent in May, figures from the Commerce Department showed. Tuesday’s report showed first-quarter productivity decreased 1.1%, compared with a previously estimated 3.1% decline, and unit labor costs rose 2.3% versus a prior reading of up 6.7%.

Unit labour costs were previously reported to have increased at a 6.7 per cent rate in the January-March period. While that gain was smaller than expected, there may be some relief here that productivity went back up. The economy grew at a 2.3 percent annual pace in the period.

US productivity rose in the second quarter, rebounding after declining for two consecutive quarters. Productivity even dipped below zero for three quarters in 2013.

Productivity growth has been sluggish since the recession.

S. worker productivity advanced at a modest pace this spring, reflecting only moderate economic growth despite steady hiring.

The data “means that potential growth is sharply lower than where most economists were assuming”, said Amherst Pierpont Securities economist Stephen Stanley.

It also has grave implications for Americans’ standard of living. In the short term, productivity is key to Federal Reserve interest-rate decisions.

The obtain in productivity and efficiencies drove device cost of labor to an increase of 0.five percent in the other section, right in connection when using the 0.five percent general opinion going through from Bloomberg. “So the output gap over the more recent time frame looks like it is closing at a faster rate than we had thought prior to GDP benchmark revisions”, said Jacob Oubina, senior U.S. economist at RBC Capital Markets in New York.

The lack of stronger productivity gains is one factor restraining increases in average hourly earnings. Steady job growth could put the central bank in a position to act as soon as September.