Labor Department reports productivity increased in Q2
August 9, 2005
The US Labor Department reported on Tuesday that productivity, the output per hour of work, was up at an annual rate of 2.2 percent in the second quarter.
That was below the first quarter’s rise of 3.2 percent, but analysts said that it was still enough to ensure that the standard of living will continue to increase.
Higher productivity means that employers can afford to pay their workers more without raising the prices on what they make or the service they provide.
Meanwhile, unit labor costs only grew at an annual rate of 1.3 percent in the second quarter, well below increases in the last nine months that had analysts worried about higher labor costs leading to higher prices, which in turn could lead to inflation.
Productivity has been up since the recession of 2001, when employers started to lay off many workers in order to keep costs down. Even though those productivity numbers are beginning to decline, analysts believe that productivity will remain high enough to keep inflation from getting out of control.
The decline in productivity signals that things have reached the point where employers must hire more workers to keep up with demand. The second quarter rise in productivity is the smallest increase since the third quarter of 2004, and the increase in unit labor costs is the lowest gain since spring of last year.