Productivity growth in US falls for third consecutive quarter in Q2

Productivity growth in the US surprisingly dropped for the third straight quarter in the second quarter of 2016. Non-farm business output per hour dropped 0.5 percent quarter-on-quarter saar, according to a US Labor Department’s report. In the previous quarter, the productivity growth had dropped 0.6 percent.

In the second quarter, the employee hours worked was up 1.8 percent, as compared with the first quarter’s 1.4 percent. Productivity in the US has been falling for three straight quarter, bringing the annual rate to 0.4 percent. This is the first outright drop in this measure since the second quarter of 2013.

For the first quarter, unit labor costs were revised to a decline of 0.2 percent from an initial reading of 4.5 percent. For the second quarter, ULC rose 2 percent quarter-on-quarter, given the slow productivity growth and a pick-up in compensation per hour.

The underlying trend in productivity growth has been quite weak since the recession. It has remained at historical low levels. On the contrary, unit labor cost growth, which is a measure of how rapidly compensation is expanding relative to output, has been picking up, noted Barclays in a research report. In recent years, decelerating growth in output prices and rapid rise in unit labor costs have depressed unit profits for firms, added Barclays.