Productivity Falls for 2nd Quarter in a Row

The measure of employee output per hour fell at a 0.3 percent annual rate in the second quarter after a revised 0.6 percent drop in the previous three months, figures from the Labor Department showed Tuesday. The median estimate of economists surveyed by Bloomberg News was a 0.9 percent decrease. Expenses per employee rose 2.2 percent.

With higher labor costs, “profitability will come under pressure,” said Eric Green, chief market economist at TD Securities in New York, who had forecast a decline in productivity. “This would create more caution in expanding payrolls, especially at a time when there is so much uncertainty.”

Economists’ productivity forecasts in the Bloomberg survey ranged from a decrease of 2 percent to a 2.2 percent gain. Efficiency in the first quarter was previously reported as having increased 1.8 percent.

The back-to-back drop in productivity was the first since the third and fourth quarters of 2008.

Unit labor costs, which are adjusted for efficiency gains, were projected to rise 2.4 percent. Labor expenses in the first quarter were revised to 4.8 percent, the biggest gain since the fourth quarter of 2008, from a previously reported 0.7 percent advance.

From the second quarter of 2010, productivity rose 0.8 percent compared with a 1.2 percent year-over-year increase in the first quarter. Labor costs rose 1.3 percent from the year-earlier period after a 1.1 percent increase in the 12 months ended in the first quarter.

The productivity report incorporated revisions to previous years. Worker efficiency growth was revised to 4.1 percent in 2010 from a previously reported 3.9 percent. For 2009, it was revised to 2.3 percent from 3.7 percent.

Labor costs fell 2 percent in 2010, the biggest decline since records began in 1948.

A lack of productivity gains, combined with stagnant growth, may slow hiring and wages, hurting Americans’ living standards. Employment grew by 117,000 in July and the jobless rate fell to 9.1 percent, the Labor Department reported last week.

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