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Home » Productivity in U.S. Climbs Fastest Pace in Three Years

Productivity in U.S. Climbs Fastest Pace in Three Years

Productivity gains in the U.S. accelerated by more than expected to the fastest pace since 2015 while labor costs fell, amid an economic-growth pickup supported by tax cuts and federal spending, a Labor Department report showed Wednesday.

August 17, 2018
IndustryWeek

Highlights of Productivity (Second Quarter)

  • Measure of nonfarm business employee output per hour increased at 2.9-percent annualized rate (est. 2.4 percent) after 0.3-percent pace in previous three months; fastest since 1Q 2015.
  • Unit labor costs fell at 0.9-percent rate (est. unchanged) following 3.4-percent rise; biggest drop since 2014.
  • Productivity increased 1.3 percent year over year; unit labor costs rose 1.9 percent y/y.

Key Takeaways
The data indicate that the lift to growth in the quarter from Republican-backed tax cuts also came with a boost to productivity. That gives President Donald Trump another economic point to cheer, though many analysts are skeptical that the administration’s policies will deliver a large, sustained acceleration in efficiency.
The latest advance in productivity compares with a 1.3-percent average pace over the period spanning 2007 to 2017, and a 2.7-percent average from 2000 to 2007. Improved gains in efficiency would support faster economic growth without generating higher inflation, a development that could suggest a slower pace of Federal Reserve interest-rate hikes than otherwise warranted.
Productivity figures can be volatile from quarter to quarter, as shown by the jump in the most recent data following a lull in the first quarter. U.S. trade tariffs and reciprocal levies may also curb business investment, and some companies have already lowered profit 
Read more

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