Second Quarter 2015 Productivity

Nonfarm business labor productivity increased 1.3 percent during the second quarter of 2015 according to the Bureau of Labor Statistics.  By their measure, output increased by 2.8 percent in the period, but it only took a 1.5 percent increase in the number of hours worked to generate the faster production.  Year-over-year, productivity was less robust, growing just 0.3 percent; in the 12 months ending in June, output grew just 2.8 percent, and hours worked increased 2.6 percent.

Also included in this release is the unit labor cost (ULC), a measure of inflation.  Compensation per hour rose 1.8 percent in the second quarter.  When productivity is subtracted from compensation, the result is an uptick of 0.5 percent for unit labor costs.  From a year ago, ULC is up 2.1 percent.

Productivity growth was weak from April through June.  The year-over-year tally is declining from a position that was already low by historical standards.  Here is another indicator demonstrating the frail nature of America’s economy during this recovery.  Year-over-year productivity has remained under 1.9 percent in every quarter since the fourth quarter of 2010; since then, annual productivity has increased by less than 1.0 percent in 12 of the last 19 quarters.  Recent surveys of businesses have been pointing to a lack of clarity from our federal government which is, in turn, constraining investment and confidence, two necessary components for any increase in productivity.      (by C. Cox)