Q2 Productivity Up 0.9%, Labor Costs Up 1.4%

Americans are working more for more money, according to a Q2 Productivity and Costs report (link opens in PDF) released today by the Labor Department.

Nonfarm business sector labor productivity increased an annualized 0.9% for the second quarter, driven primarily by a Q/Q 2.6% boost in output and a 1.7% bump in the number of hours worked. After dropping off a revised 1.7% in Q1, analysts had expected a slightly smaller 0.6% comeback. 

Productivity measures output per hour of work. Weak productivity suggests that companies may have to hire because they can't squeeze more work from their existing employees -- that is, if demand for a company's products is growing.

Productivity growth has been weaker recently, rising 1.5% in 2012 and 0.5% in 2011. Annual productivity growth averaged 3.2% in 2009 and 3.3% in 2010. In records dating back to 1947, it's been about 2%.

While productivity made gains for Q2, labor costs managed to increase at an even faster 1.4% rate. The 0.9% increase in productivity was accompanied by a 2.3% bump in average hourly compensation. With Q1's revised labor costs down a significant 4.2%, analysts also underestimated Q2's labor cost growth at just 1%. 

Source: bls.gov. 

For manufacturing, productivity increased 2.7%, while labor costs headed 1.4% higher.

Comparing this quarter to Q2 2012, overall productivity remains unchanged, while unit labor costs are up 1.6%. 

-- Material from The Associated Press was used in this report.


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