U.S. Productivity Weakens, Labor Costs Jump

Washington, Dhu-AlQa’dah 29, 1437, Sep 1, 2016, SPA — U.S. productivity fell in the second quarter by more than first estimated, while labor costs accelerated sharply, the government reported Thursday.
The Labor Department said productivity fell at an annual rate of 0.6 percent, even worse than the 0.5 percent decline initially reported. It matched the 0.6 percent drop in the January-March period and marked the third consecutive quarter that productivity has weakened.
Labor costs rose at an annual rate of 4.3 percent in the April-June period, the biggest increase since a 5.7 percent advance in the fourth quarter of 2015. Labor costs fell at a 0.3 percent annual rate in the first quarter.
The downward revision of productivity reflected the fact that the government last week revised lower its estimate of overall output, as measured by gross domestic product (GDP).
Productivity—the amount of output per hour of work—is the major factor that supports rising living standards, and it has been lagging in the current seven-year economic expansion, limiting overall GDP growth.
Annual economic growth has averaged just 1.2 percent in the time since the 2007-2009 Great Recession, the poorest performance in the post-World War II period. Economists say the weakness in productivity has been a factor in the slow growth seen over the past seven years. Federal Reserve (Fed) Chair Janet Yellen has pointed to productivity as a key challenge facing the country.
Economists believe businesses need to begin focusing more on increasing the efficiency of their existing workforce rather than just hiring more workers to meet demand. They expect companies to start focusing on productivity as the labor market hits full employment and the pool of available qualified workers diminishes.
17:18 LOCAL TIME 14:18 GMT