U.S. productivity growth rises slightly in Q2

The rate of U.S. productivity growth picked up slightly in the second quarter, with nonfarm business output per hour rising 0.9 percent sequentially, as compared with 0.1 percent in the first quarter and 1.3 percent in the fourth quarter.

Nonfarm business output expanded a strong 3.4 percent, recovering from the first quarter weakness. But employee hours worked also recovered in the second quarter to 2.5 percent from 1.6 percent, leading to a moderate pace of productivity growth. Real compensation per hour was up 1.9 percent, the second quarterly rise after declining a sharp 7.9 percent in the fourth quarter of 2016. Unit labor costs rose just 0.6 percent after having risen by 5.4 percent in the first quarter.

On a year-on-year basis, productivity rose 1.3 percent, unchanged from the first quarter, but a clear rebound from the very slow growth throughout 2016. However, in spite the recent pickup, productivity growth continues be subdued by historical standards. On the contrary, unit labor cost growth has been more buoyant.

Slow growth in output prices, disappointing productivity trends, and fast-rising unit labor costs have depressed unit profits for companies in recent years and have been one factor preventing wages from picking up at a more rapid rate, noted Barclays in a research report. But, unit profits have improved slightly over the past two quarters and are now in positive territory for the first time since the beginning of 2015.

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