Nonfarm labor productivity fell at a seasonally adjusted annual rate of 4.6% in the second quarter from the prior quarter.
Photo:
Houston Cofield/Bloomberg News
U.S. labor productivity declined for the second consecutive quarter as overall economic output contracted and employers spent more on labor as they added workers.
U.S. nonfarm labor productivity—a measure of goods and services produced in the U.S. per hour worked—fell at a seasonally adjusted annual rate of 4.6% in the second quarter from the prior quarter, the Labor Department said Tuesday. Economists surveyed by The Wall Street Journal had estimated a drop of 5%.
Unit labor costs, a measure of worker compensation and productivity, increased at a 10.8% pace in the second quarter from the prior quarter, Labor said. Economists had expected a 9.5% increase.
Quarterly productivity figures are volatile but the weak second-quarter number follows a 7.4% pullback in the first quarter, the sharpest drop in 74 years. Together with rising labor costs, the report points to the challenges for the Federal Reserve’s efforts to tamp down inflation that is running at a four-decade high.
Rising productivity is the key to improving living standards; it allows companies to raise wages without raising prices and fueling inflation. Instead, businesses appear to be paying workers more to produce less. The higher unit labor costs suggest companies will either endure lower profits or pass on higher costs to consumers.
“A worsening trend in unit labor costs will only support the Fed’s case for further rate increases going forward,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said ahead of Tuesday’s data release.
The central bank has increased rates four times this year from near zero in March in an effort to raise borrowing costs, slow economic growth and bring inflation down.
The consecutive negative productivity readings are a reversal from earlier in the pandemic, when the economy was expanding rapidly and businesses appeared to be adopting new technology to cope with worker shortages and limits to face-to-face contact.
Write to Jeffrey Sparshott at jeffrey.sparshott@wsj.com
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Nonfarm labor productivity fell at a seasonally adjusted annual rate of 4.6% in the second quarter from the prior quarter.
Photo:
Houston Cofield/Bloomberg News
U.S. labor productivity declined for the second consecutive quarter as overall economic output contracted and employers spent more on labor as they added workers.
U.S. nonfarm labor productivity—a measure of goods and services produced in the U.S. per hour worked—fell at a seasonally adjusted annual rate of 4.6% in the second quarter from the prior quarter, the Labor Department said Tuesday. Economists surveyed by The Wall Street Journal had estimated a drop of 5%.
Unit labor costs, a measure of worker compensation and productivity, increased at a 10.8% pace in the second quarter from the prior quarter, Labor said. Economists had expected a 9.5% increase.
Quarterly productivity figures are volatile but the weak second-quarter number follows a 7.4% pullback in the first quarter, the sharpest drop in 74 years. Together with rising labor costs, the report points to the challenges for the Federal Reserve’s efforts to tamp down inflation that is running at a four-decade high.
Rising productivity is the key to improving living standards; it allows companies to raise wages without raising prices and fueling inflation. Instead, businesses appear to be paying workers more to produce less. The higher unit labor costs suggest companies will either endure lower profits or pass on higher costs to consumers.
“A worsening trend in unit labor costs will only support the Fed’s case for further rate increases going forward,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said ahead of Tuesday’s data release.
The central bank has increased rates four times this year from near zero in March in an effort to raise borrowing costs, slow economic growth and bring inflation down.
The consecutive negative productivity readings are a reversal from earlier in the pandemic, when the economy was expanding rapidly and businesses appeared to be adopting new technology to cope with worker shortages and limits to face-to-face contact.
Write to Jeffrey Sparshott at jeffrey.sparshott@wsj.com
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8