Courtesy of Mish.
US nonfarm productivity declined 0.5% this quarter, down three consecutive quarters. This is the longest negative stretch since 1979.
Manufacturing productivity declined 0.2%.
The BLS calculates labor productivity, or output per hour, by dividing an index of real output by an index of hours worked of all persons, including employees, proprietors, and unpaid family workers.
The Bloomberg Econoday economists’ consensus estimate was for a productivity gain of 5%. Instead, productivity declined 0.5%.
Highlights
Output picked up in the second quarter but not quite as much as hours worked or compensation. Productivity fell 0.5 percent in the quarter for the third decline in a row. This is the longest negative streak in the history of this report which goes back to just after WWII.
Unit labor costs rose 2.0 percent but, in a plus, were revised sharply lower in the first quarter which now shows a rare decline at minus 0.2 percent. But most readings in this report are not positive including the year-on-year rate for productivity which is down 0.4 percent for the first decline since second-quarter 2013. In an unfavorable contrast, year-on-year unit labor costs are up 2.1 percent.
Lack of business investment is unfortunately a central negative of this cycle and it results in weakening productivity for the nation. Americans are working more hours but production isn’t keeping up.
Recent History
First estimate for second-quarter non-farm productivity is expected to improve from a very weak first quarter with the consensus pointing at a plus 0.5 percent annualized rate and benefitting from a slightly higher but still weak rate of output. An improvement in output would hold down unit labor costs which are forecast to rise 1.8 percent, far lower than the 4.5 percent and 5.4 percent surges of the prior two quarters.
Longest Losing Streak Since 1979
The Wall Street Journal reports U.S. Productivity Fell for Third Straight Quarter.
Nonfarm business productivity, measured as the output of goods and services produced by American workers per hour worked, decreased at a 0.5% seasonally adjusted annual rate in the second quarter as hours increased faster than output, the Labor Department said Tuesday.
It was the third consecutive quarter of falling productivity, the longest streak since 1979. Productivity in the second quarter was down 0.4% from a year earlier, the first annual decline in three years and just the sixth year-over-year drop recorded since 1982.
Productivity growth started to slow before the 2007-2009 recession and has all but stalled in recent years.
Yellen Cautiously Optimistic on Productivity
