Surge in US worker productivity illuminates positive inflation trajectory
us economy
Growth in worker productivity in the US gained steam, underscoring lighter labour-cost pressures and a better outlook for inflation. Nonfarm productivity, or the amount an hourly worker produces per hour, rose at an annualised rate of 2.3 per cent last quarter, the Labor Department's Bureau of Labor Statistics said. That was up from the 0.4 per cent growth pace in the January-March period, which was revised upward.
Economists surveyed by Reuters had estimated a 1.7 per cent productivity growth rate, following a previously reported 0.2 per cent rise in the first quarter. Over the past year, productivity has advanced at a robust 2.7 per cent pace.
Unit labour costs, which relate the price of labour to a single unit of output, advanced at a 0.9 per cent rate in the April-June quarter. The first quarter was revised down to indicate a 3.8 per cent increase in unit labour costs from the initially reported 4.0 per cent. On a year-over-year basis, labour costs advanced at a modest 0.5 per cent rate.
The government reported on Wednesday that annual labour costs posted their smallest increase in two and a half years in the second quarter. The Federal Reserve on Wednesday kept its benchmark overnight interest rate in a range of 5.25-5.50 per cent, where it has been since last July. The Fed has indicated it could reduce borrowing costs as soon as its next policy-setting meeting in September.
Compensation for workers rose at a 3.3 per cent rate last quarter, down from the 4.2 per cent pace in quarter 1. Year over year, compensation advanced at a 3.2 per cent rate.
That means, all told, the productivity surge of the US workforce is very auspicious for the economy, keeping labour costs in check and supporting a benign outlook on inflation. Couple that with an ultra-cautious approach to interest rates by the Federal Reserve, and it points to a balanced path ahead for growth and stability.