U.S. Productivity Dives Most Since 1948


U.S. Department of Labor | Image by Getty Images

U.S. worker productivity recorded the largest annual second quarter drop since 1948, according to the Labor Department.

Data from the department show wages and benefits increased by 11% annually while hourly output per worker fell by 2.5% from a year ago.

The productivity decline came from the services sector. It reflects an imbalance in the workplace, where employees are costing more to produce fewer goods and services than in the previous year, despite a 2.6% increase in hours worked.

The rising labor costs compel businesses to offload their expenses onto the end consumer. As consumer products become more expensive, workers demand more pay to cover the increasing costs.

This back-and-forth creates a wage-price spiral that can keep inflationary pressures elevated.

At an annualized rate, nonfarm productivity declined 4.6% in the second quarter. Economist expectations were that productivity would decline by 4.7% between April and June, according to a Reuters poll.

As worker compensation goes up to match the cost of inflation, it becomes more difficult for businesses to measure underlying productivity, which is about 1% or less, according to some economists.

With such a sharp decline in U.S. productivity in July, economists look to the Federal Reserve’s next FOMC meeting in September for a clearer picture of what steps chairman Powell will take to curtail spending and allow prices to cool down.

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5 months ago


Rex Cumming
Rex Cumming
Reply to  Bobby
5 months ago

LOL “Productivity” reductions is not always a bad thing. If you read this carefully, what they are saying is that workers are being paid more. “Productivity” is measured by “output” to “cost of Labor.” So this means labor is making a better share of what they produce and companies (which are already very profitable) are sharing that profit in pay to employees. So yes, maybe the democrats have finally helped us move back to a place where workers actually gain a bit more money for the work they do. Is that such a bad thing?

Reply to  Rex Cumming
5 months ago

Productivity reductions are ALWAYS a bad thing. Increases in productivity is the ONLY sustainable way workers can achieve a REAL increase in wages.

Rex Cumming
Rex Cumming
5 months ago

There is this odd schism in America where we think “productivity of labor” always means a good thing. To a certain extent it is but not when workers can’t make ends meet. This so called lowering of productivity can be a good sign that labor is starting to reap some of the gains they produce. This of course lowers our so called “productivity” numbers for corporations but if profits are going to employees it’s a good sign things can improve for the working class. And that is good for America. The extreme alternative is slavery. There is a lot of “productivity” in paying nothing and producing goods sold for a high profit. It’s amazing more Americans don’t understand this.