Productivity in the U.S. Fell for Another Quarter

Worker productivity in the U.S. has dropped during the spring making it the third consecutive quarter the rate has fallen, extending a stall in growth of labor productivity that is threatening to restrain the pay of workers and the economy as a whole moving forward.

Business productivity that was non-farm related measured as output of goods and services that American workers produced per hour worked, fell by a 0.5% adjusted annual rate during the second quarter as the hours increased at a faster rate than the output, said the Labor Department Tuesday morning.

Productivity had fallen by 0.6% during the first three months of 2016, and was not revised from its earlier estimate. It dropped by a pace of 2.4% during the final quarter of 2015.

During the second quarter of 2016, productivity was down 0.4% from the same period one year ago, which had been the first decline for the year in more than three years.

Unit labor costs by nonfarm businesses saw any increase of 2% as an annual rate during the spring, after dropping at a pace of 0.2% during the first three months of 2016.

Compared to the same period one year ago, unit labor costs were higher by 2.1% during the second quarter.

Economists had expected a rise in productivity of 0.4% and unit labor costs to move higher by 1.8% during the second three months of this year.

The pace of growth in productivity is an important factor in the determining of how quickly worker overall economic output and pay can grow during time without helping stoke higher inflation.

Healthy gains in productivity, as seen during the late 1990s as well as the early 2000s, can then translate into strong economic growth and rising wages adjusted for inflation.

However, sluggish productivity growth will restrain economic and wage growth.

Growth in productivity began to slow prior to the recession of 2007-2009 and had stalled of recent. Annual growth was averaging 1.3% during 2007 to 2015, only half the average pace in 2000 to 2007 of 2.6%.

Janet Yellen the Chairwoman at the Federal Reserve said in June that the outlook for growth in productivity was an important uncertainty for the economy in the U.S. that would help to determine the trends for the future for standards of living.

Business investment is notably a sore spot in recent months within the economy. A measure that is watched closely watched for business spending, fixed nonresidential investment, dropped for the last three quarters.

Some weakness came from the U.S. mining industry.