Q2 Labor Costs Down, Productivity Rebounds

August 7, 2001 (PLANSPONSOR.com) - Falling labor costs led American worker productivity in the second quarter to a 2.5% annual growth rate, the largest gain since the second quarter of 2000, according to the Department of Labor.

The number, which improves on the first quarter’s lackluster revised growth rate of 0.1% and comes in above analysts- expectation, which put the figure at 1.5%. Productivity in the first quarter had initially been reported as a 1.2% decline.

Output over the period ticked up at a 0.1% rate, while the hours of all workers fell at a 2.4% rate, the largest decline in hours since the first quarter of 1991.

The report also shows that unit labor costs rose by 2.1%, compared with a 5% increase in the previous quarter.

While the second-quarter numbers were above the 1.6 percent productivity gain seen in forecasts of analysts polled by Reuters, downward revisions to previous years’ data sounded a mildly cautionary note.

Warning Signs

There was some room for caution in the report. Figures were revised to reflect updated output and employment information, resulting in an average annual productivity growth between 1996 and 2000 of 2.5%, down slightly from the 2.8% annual rate previously reported.

Additionally, on a year-over-year basis, productivity in the second quarter rose at just a 1.6% annual rate, its slowest gain since the second quarter of 1997.

Productivity measures the amount of goods and services a worker can create per hour.