The FINANCIAL — U.S. worker productivity advanced at a modest pace this spring, reflecting only moderate economic growth despite steady hiring, according to Nasdaq.
The productivity of nonfarm workers, measured as the output of goods and services per hour worked, increased at a 1.3% seasonally adjusted annual rate in the second quarter, the Labor Department said on August 11. From a year earlier, productivity was up 0.3%.
Economists surveyed by The Wall Street Journal had forecast a 1.6% advance from the prior quarter.
The increased productivity in the second quarter was a result of output increasing at a 2.8% pace and hours worked rising 1.5%
A gauge of compensation costs, unit labor costs, increased at a 0.5% annual rate from April through June. Economists had expected a 0.1% gain. From a year earlier, unit labor costs were up 2.1%.
The gain in productivity last quarter coincides with an uptick in economic growth. Gross domestic product advanced at a 2.3% annual pace in the second quarter. That is modest growth, but an acceleration from the first quarter’s paltry 0.6% advance.
Productivity data can be volatile from quarter to quarter and are often heavily revised. Tuesday’s report showed first-quarter productivity decreased 1.1%, compared to a previously estimated 3.1% decline, and unit labor costs rose 2.3% versus a prior reading of up 6.7%.
Productivity declined at a 2.2% pace in the fourth quarter of 2014.
More broadly, productivity gains have been lackluster during the now six-year-old economic expansion, growing a little better than a 1% annual pace through the end of last year. That’s roughly half as strong as the average gain in the 20 years before the latest recession began in late 2007.
The weak productivity gains in recent years are a result of steady hiring, which increases the total number of hours worked, combined with only a modest increase in output. Employers have added to payrolls each month for nearly five years, but the economy has struggled to grow at much better than a 2% pace during that time.
The lack of stronger productivity gains is one factor restraining increases in average hourly earnings. For wages to increase, workers may need to become more productive.
“The most important factor determining continued advances in living standards is productivity growth,” Federal Reserve Chairwoman Janet Yellen said in a speech last month. “Over time, sustained increases in productivity are necessary to support rising household incomes.”
Fed policymakers are closely watching measures of the labor market as they consider raising short-term interest rates for the first time since 2006. Steady job growth could put the central bank in a position to act as soon as September.
Tuesday’s report showed stronger productivity gains in the manufacturing sector, rising at a 2.5% pace in the second quarter and up 1.1% from a year earlier.