U.S. productivity declines in second quarter


The numbers: U.S. nonfarm worker productivity fell at a 4.6% annual clip in the second quarter, the government said Tuesday.

Economists surveyed by MarketWatch had projected a 4.3% decline.

This is the second straight decline quarterly decline in productivity, which measures output per hour. In the first quarter, productivity fell at a steep 7.4% rate, the largest decline in 75 years.

Over the past 12 months, U.S. productivity fell at a record 2.5% rate.

Key details: Workers worked more and produced less in the second quarter. Hours worked ran a 2.6% rate in the second quarter, down from a 5.3% rate in first quarter.

Output in the second quarter fell at a 2.1% rate after a 2.5% decline in the first three months of the year.

Unit-labor costs, a key measure of wages,  jumped at 10.6% rate, down only slightly from a revised 12.8% rate in the first quarter.

Year-over-year unit labor costs rose 9.5% in the second quarter, the fastest pace since the first quarter of 1982.

Big picture: Productivity is hard to measure in normal times, so economists are wary of the data in the post-pandemic era. Still, economists are troubled because productivity low productivity leads to a host of bad outcomes – higher inflation, lower worker wage growth and a slower economy, said Nela Richardson, chief economist at ADP.

Looking ahead: “One way for companies to protect their profit margins against rising wage bills is to become more productive, which helps keep a lid on unit labor costs. However, today’s data indicates that productivity won’t act as a buffer. We expect elevated wage growth will continue to exert downward pressure on companies’ profit margins in coming quarters as companies’ pricing power moderates in a slower demand environment,” Lydia Boussour, economist at Oxford Economics.

Market reaction: U.S. stocks DJIA, -0.18% SPX, -0.42% opened lower on Tuesday after oil futures turned higher on news reports that Russia was halting crude flows on one pipeline to Europe.

This article was originally published by Marketwatch.com. Read the original article here.

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