Worker Productivity Up By 2.2% In Q2

Q2 worker productivity

By Martin Crutsinger

WASHINGTON – U.S. companies got more output from their workers this spring than initially thought, especially as the pace of hiring slowed dramatically.

Rising productivity can boost corporate profits. It can also slow job creation if it means companies are getting more from their current staff and don't need to add workers.

Productivity, the amount of output per hour worked, increased at an annual rate of 2.2% in the April-June quarter after declining at a 0.5% pace in the first quarter of the year. That's up from an initial estimate of a 1.6% gain. Labor costs rose at an annual rate of 1.5%, slightly lower than the 1.7% initially estimated. The government said the economy grew at an annual rate of 1.7% in the April-June quarter, up slightly from an initial estimate of 1.5%. The increase led to higher productivity gains.

There are limits to how much companies can squeeze from workers. When that happens, productivity begins to slow and companies usually hire more workers to keep pace with demand.

One reason productivity improved in the second quarter is hiring slowed to just 75,000 jobs a month from April through June. That's down from an average of 226,000 a month in the first quarter.

More: A Sign That The Frozen Job Market Is Thawing

U.S. employers added 163,000 jobs in July, the best month of hiring in five months. The unemployment rate edged up to 8.3%. Hiring probably won't accelerate from that level unless economic growth picks up or productivity slows, economists say.

The government will release the August employment report on Friday. Economists forecast that the economy added 135,000 jobs last month, and the unemployment rate stayed at 8.3%.

Economists said they expect productivity will slow from the spring pace for the rest of this year and through 2013. Michael Englund, chief economist at Action Economics, said he was looking for productivity growth at 1% or less in 2013.

Peter Newland, senior economist at Barclays, said productivity should slow as companies increase hiring in coming months.

The Federal Reserve closely follows changes in productivity and labor costs to make sure that inflation pressures are not building. That doesn't seem to be much of a worry in the near term.

Over the past year, productivity has risen 1.2%. That is far below the 3% rise in the average productivity rate in 2009 and 2010. Those gains were mostly due to massive job layoffs during the recession as companies slashed costs to compensate for falling demand.

Economists said higher productivity is typical during and after a recession. Companies tend to shed workers in the face of falling demand and increase output from a smaller work force. Once the economy starts to grow, demand rises and companies eventually must add workers if they want to keep up.

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The US worker is the most productive in the world and our productivity continues to rise. To bad wages don't rise accordingly. Oh yeah, the CEOs who compensations have risen to obscene levels think we make too much money. They would prefer we make dollar an hour wages, with no benefits like in Mexico or China.

September 06 2012 at 2:07 AM Report abuse rate up rate down Reply

They are forcing mandatory overtime instead of hiring more help.

September 05 2012 at 9:38 PM Report abuse rate up rate down Reply
Sweet Caroline

This is depressing news. The working class is truly doing all it can do, but the wealthy aren't investing in America anymore because they are holding the economy stagnate. This is why revolutions took place and that's probably what needs to happen again. How cool it would be if workers could actually earn a livable wage, with health benefits and a retirement plan. Unions shed blood to make it happen in the past. All workers need to be united against their masters and have their needs met. Why should America only be for those born rich? That's unAmerican.

September 05 2012 at 9:33 PM Report abuse rate up rate down Reply

" students;" "Maybe" Sorry-I'm beat!

September 05 2012 at 8:40 PM Report abuse rate up rate down Reply

Productivity is definitely up on my job. Last year, my classes averaged about 24 students, I now have an average of 32 students. If you throw in the extended days and the furlough days, I'd have to say my productivity is up at least 35%. maybe next year they can throw in an average of 48 students and claim productivity gains of 100% over two years. Welcome to the new face of American education.

September 05 2012 at 8:38 PM Report abuse rate up rate down Reply

Take into the INFLATION rate of the money used to figure the poductivity rate. and it does not look better, but in fact worse than what came before.

September 05 2012 at 7:00 PM Report abuse rate up rate down Reply

Shocking....worker productivity is up, could it be possible people just want to keep their jobs since its so hard to find another ? I can tell you one thing, its not because the pay increased...not in NYC anyway

September 05 2012 at 4:44 PM Report abuse +2 rate up rate down Reply
1 reply to acmook's comment

You are soo right. Corporate America is piling more & more on their employee's backs than ever before , and they are making record high profits whilst miring us grunts in stagnant pay freezes and reductions in benefits knowing that we don't have very many options if we leave.

September 05 2012 at 7:26 PM Report abuse +1 rate up rate down Reply

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