Productivity Growth Revised Down as Bidenflation Devoured Compensation Gains
The productivity of U.S.workers improved by less than initially thought in the second quarter and real hourly compensation fell by more than reported earlier, the Labor Department said on Thursday.
. Nonfarm productivity grew at a 2.1 percent annualized rate in the three months from April to June. It was previously reported to have increased at a 2.3 percent rate.
The downward revision was a surprise. Analysts polled by Econoday had expected an upward revision to a 2.4 percent rate. Compared to the second quarter of 2020, productivity increased at a 1.8 percent rate. Labor productivity measures hourly output per worker. Productivity jumped when the initial pandemic hit as less productive jobs were slashed and many workers were sidelined, a typical pattern in economic downturns. Productivity grew at a 4.3 percent rate in the first quarter. Manufacturing productivity saw an upward revision from the preliminary estimate of 6.9 percent to an 8 percent rate. Ouput increased at a 5.5 percent pace while hours worked declined 2.3 percent, likely due to shortages in semiconductors that hobbled automaking.
The revision was due to an upward revision in nondurable manufacturing, from 7.8 to 10.0. Hours worked rose in the second quarter but output grew even faster.
The Department of Labor said the output gain was driven primarily by the chemical products manufacturing industry.
The second-quarter increase in nondurable manufacturing sector productivity was the largest since the first quarter of 2003, when productivity also increased 10.0 percent. In durable goods manufacturing, productivity held steady as hours worked declined alongside a decline in output. Total manufacturing sector productivity increased 7.2 percent from the same quarter a year ago. Hours worked across all sectors increased at a 6.0 percent rate last quarter, revised up from the 5.5 percent rate, reflecting the strength of demand for labor in the second quarter. Hourly compensation increased at a 3.4 percent rate last quarter. This had previously been reported as rising at a 3.3 percent pace. That is a marked pick-up in labor costs from the 1.4 percent pace in the first quarter. But even with the gains, inflation means that workers were falling behind. Adjusted for inflation, compensation fell at a 4.6 percent pace, worse than the 2.7 percent rate in the preliminary reading. Unit labor costs, which measures the price of labor to produce a unit of output, rose at a 1.3 percent rate.
These were reported to have grown at a one percent pace in the preliminary estimate.
The upward revision indicates stronger than expected inflationary pressures were already present in the second quarter. Unit labor costs compared with a year ago were revised up to show a 0.2 percent gain from the preliminary report of 0.1 percent. .
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