Worker out­put inches up in 2Q

Mod­est in­crease of 0.9% seen as wor­ri­some for ex­pan­sion

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - In­for­ma­tion for this ar­ti­cle was con­trib­uted by Martin Crutsinger of The As­so­ci­ated Press and Pa­tri­cia Laya, Vince Golle and Jor­dan Yadoo of Bloomberg News.

WASH­ING­TON — The pro­duc­tiv­ity of Amer­i­can work­ers rose just mod­estly in the spring, ex­tend­ing a wor­ri­some is­sue that has per­sisted through­out this ex­pan­sion.

Pro­duc­tiv­ity grew at an an­nual rate of 0.9 per­cent in the April-June quar­ter, slightly bet­ter than a scant 0.1 per­cent rate of in­crease in the first quar­ter, the La­bor Depart­ment re­ported Wed­nes­day. La­bor costs edged up at a 0.6 per­cent rate in the sec­ond quar­ter, a sharp slow­down from a 5.4 per­cent growth rate in the first quar­ter.

Pro­duc­tiv­ity, the amount of out­put per hour of work, has been weak through­out the eco­nomic re­cov­ery, now in its ninth year. Many an­a­lysts say the is­sue is the big­gest eco­nomic chal­lenge fac­ing the coun­try.

With­out more gains in ef­fi­ciency, the econ­omy’s so­called speed limit — the pace at which it can ex­pand with­out stok­ing in­fla­tion — is re­duced.

“De­spite the re­cent pickup, pro­duc­tiv­ity growth re­mains sub­dued by his­tor­i­cal stan­dards,” Bar­clays PLC econ­o­mist Ble­rina Uruçi wrote in a note af­ter the re­port. “Slow growth in out­put prices, dis­ap­point­ing pro­duc­tiv­ity trends, and fast-ris­ing unit la­bor costs have de­pressed unit prof­its for com­pa­nies in re­cent years and have been one fac­tor pre­vent­ing wages from pick­ing up at a faster pace.”

For 2016 over­all, pro­duc­tiv­ity ac­tu­ally de­clined — the first fall in 34 years. Pro­duc­tiv­ity last year had pre­vi­ously been re­ported as a slight in­crease of 0.2 per­cent. How­ever, that gain

evap­o­rated as part of the gov­ern­ment’s an­nual bench­mark data re­vi­sions. It marked the first an­nual de­cline in pro­duc­tiv­ity since a 1 per­cent drop in 1982.

The small im­prove­ment in the sec­ond quar­ter re­flected the fact that over­all eco­nomic growth, as mea­sured by the gross do­mes­tic prod­uct, ac­cel­er­ated to a 2.6 per­cent rate

of in­crease com­pared with a 1.2 per­cent gain in the first quar­ter.

Since 2007, an­nual pro­duc­tiv­ity in­creases have av­er­aged just 1.2 per­cent. That’s less than half the av­er­age an­nual gains of 2.6 per­cent logged in 2000 to 2007, when the coun­try was ben­e­fit­ing from in­creased ef­fi­ciency from com­put­ers and the In­ter­net in the work­place.

Ris­ing pro­duc­tiv­ity means in­creased out­put for each hour of work, which al­lows em­ploy­ers to raise wages with­out trig­ger­ing in­fla­tion.

The chal­lenge of in­creas­ing pro­duc­tiv­ity back to the lev­els be­fore the re­ces­sion of 20072009 will be a key fac­tor in deter­min­ing whether Pres­i­dent Don­ald Trump will achieve his goal of in­creas­ing over­all growth. The econ­omy’s po­ten­tial for growth is a com­bi­na­tion of la­bor force ex­pan­sion and growth in pro­duc­tiv­ity.

Dur­ing the cam­paign, Trump pledged to dou­ble growth to 4 per­cent or bet­ter. But since tak­ing of­fice, his ad­min­is­tra­tion has pro­jected

a slightly lower but still am­bi­tious goal of push­ing an­nual growth back up to 3 per­cent. Trump’s first bud­get projects that faster eco­nomic growth will pro­duce $2 tril­lion in deficit re­duc­tion over the next decade, a fore­cast most pri­vate economists view as overly op­ti­mistic.

AP/ELISE AMENDOLA

A crew works on a street in down­town Bos­ton in June. La­bor costs edged up 0.6 per­cent in the sec­ond quar­ter, along with a mod­est rise in worker pro­duc­tiv­ity.

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