The FINANCIAL — U.S. worker productivity advanced this spring, reflecting a bounce back in economic activity following a slow start to 2015, according to Nasdaq.
The productivity of nonfarm workers, measured as the output of goods and services per hour worked, increased at a 3.3% seasonally adjusted annual rate in the second quarter, the Labor Department said on September 2. That was the strongest pace since the fourth quarter of 2013. From a year earlier, productivity was up 0.7%.
Economists surveyed by The Wall Street Journal had forecast a 3% increase from the prior quarter.
The increased productivity in the second quarter was the result of output increasing 3.3% and hours worked rising 2.6% .
A gauge of compensation costs, unit labor costs, fell at a 1.4% annual rate from April through June. From a year earlier, unit labor costs were up 1.7%.
The gain in productivity last quarter largely tracks with increased economic output. Gross domestic product grew at a 3.7% annual pace in the second quarter, a solid bump from the first quarter’s tepid 0.6% advance.
Productivity data can be volatile from quarter to quarter and are often heavily revised. In a report last month, the Labor Department had initially estimated second-quarter productivity increased 1.3% and unit labor costs rose 0.5%.
Wednesday’s report showed first-quarter productivity decreased 1.1%, unchanged from the previous estimate, and unit labor costs rose 2.6%, versus a prior reading of 2.3%.
Productivity has been sluggish in the six years since the recession ended, growing a little better than a 1% annual pace through the end of 2014. That may be one reason overall economic growth has been constrained and wage growth paltry.
“The most important factor determining continued advances in living standards is productivity growth, defined as the rate of increase in how much a worker can produce in an hour of work,” Federal Reserve Chairwoman Janet Yellen said in a July speech. “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 weigh when to raise short-term interest rates for the first time since 2006. Fed officials have said that decision could come as soon as September, though recent mixed economic data has raised doubts about the timing of liftoff.
Wednesday’s report showed weaker productivity gains in the manufacturing sector than previously thought. Productivity increased at a 2.3% pace in the second quarter, versus a previously estimated 2.5% pace, and was up 1.0% from a year earlier.