August 09, 2012
WASHINGTON ? U.S. productivity rebounded in the second quarter, posting a solid gain as companies generated more goods and services even though there was little change in the number of hours their employees worked.
The Labor Department said Wednesday that productivity rose 1.6 percent in the April-to-June period, a sharp contrast to the first quarter's revised decline of 0.5 percent. Economists surveyed by MarketWatch expected productivity to climb by 1.3 percent.
Productivity measures the goods and services generated by an economy. In the long run, higher productivity usually results in higher profits for businesses and bigger paychecks for workers.
The increase in second-quarter productivity comes down to a 2 percent gain in the amount of goods and services produced, known as output, and a much slower 0.4 percent increase in hours worked. Productivity rises when output increases faster than the amount of hours workers spend on the job.
The number of hours worked slowed considerably in the second quarter from the 3.2 percent rise in the first three months of the year. The drop-off likely reflects the decline in hiring during the second quarter.
Companies boosted production to keep up with demand but grew more cautious about adding workers in light of the financial crisis in Europe and signs of economic weakness at home.
"Businesses are in the driver's seat when it comes to hiring and pay these days, and that is part of the reason that job and, more importantly, income gains are so weak," said Joel Naroff of Naroff Economic Advisors.
Unit-labor costs slowed to a 1.7 percent increase from 5.6 percent in the first quarter. Unit-labor costs reflect how much it costs a business to produce one unit of output, such as a ton of coal.
Hourly wages rose 3.3 percent in the second quarter, or a healthy 2.6 percent when adjusted for inflation.
Still, workers have actually seen a 0.5 percent decline in the inflation-adjusted value of their paychecks in the past year. That helps explain why the U.S. economy is growing so slowly. Consumer spending accounts for about 70 percent of economic activity.
In the manufacturing sector, meanwhile, productivity slowed to a 0.2 percent increase from 5.5 percent in the first three months of 2012. Unit-labor costs also rose after declining in the first quarter.
After the 2007-09 recession, productivity surged as companies fired workers and required their remaining employees to do more with less. Yet productivity has slowed in the past year and a half, suggesting the easy gains that often arise after a recession have mostly run their course.
Productivity rose just 0.7 percent in 2011 after revised gains of 3.1 percent in 2010 and 2.9 percent in 2009.
Sometimes a slowdown in productivity is a prelude to an increase in hiring, especially as an economy gathers steam. Companies have to add workers to keep up with rising demand. Yet the current weakness in the U.S. economy provides little evidence that hiring is about to accelerate sharply.
Figures for productivity are revised twice after the initial report is released. The data are subject to large revisions, and economists caution that it can take several quarters to establish a trend.
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AP-WF-08-08-12 1854GMT
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