No growth on a year-on-year basis, matching lowest since 2008
By Greg Robb, MarketWatch
WASHINGTON (MarketWatch) — U.S. workers and businesses improved their productivity in the April-to-June period following two straight negative quarters.
Productivity rose at a 0.9% annual rate in the second quarter, the Labor Department said Friday.
This follows revised 1.7% declines in both the first quarter of 2013 and the last three months of 2012.
Economists surveyed by MarketWatch had forecast a 0.7% increase in the second quarter.
Even with the pickup in the second quarter, productivity was flat over the past four quarters, matching the pace of the first quarter. This is the slowest growth since the fourth quarter of 2008.
Productivity, defined as real output divided by hours worked, is one of the most important — but elusive -— economic data points.
Productivity gains, if the benefits are shared, can hold the key to better living standards, higher wages, increased profits and low inflation.
After surging at the start of the recovery, reaching a 5.4% year-over-year rate in the fourth quarter of 2009, productivity has cooled sharply.
In a speech this week, Dennis Lockhart, the president of the Atlanta Fed, said that the central bank would be watching productivity closely in deciding whether to taper its $85 billion-per-month asset purchase plan.
That’s because productivity holds the key to the puzzle about whether the economy is half-full or half-empty, he suggested.
GDP data show a subpar economy, rising below 2%. But the monthly job reports suggest growth is on the upswing, with job gains of around 190,000 per month. This trend cannot last for long.
If productivity picks up, then GDP growth will increase to the level consistent with recent employment growth, he said.
Details
In the second quarter, output increased 2.6% on an annualized basis, while hours worked rose 1.7%, the government estimated.
Unit labor costs rebounded 1.4% after dropping 4.2% in the first quarter.
As the name implies, unit labor costs are what businesses pay for the labor needed to produce a “unit” of output, whether it’s tons of steel or words of journalism.
Real compensation per hour — that is, adjusted for inflation — increased 2.3%, after a sharp 7.3% decline in the prior quarter.
Real hourly compensation is up only 0.1% in the past four quarters.
In a separate report, the Commerce Department said housing starts rose 5.9% to 896,000 in July. Read more on housing starts.
