US productivity down for third straight quarter

news
10 August 2016

The productivity of US workers unexpectedly dropped for the third straight quarter, adding to efficiency woes that had bedeviled the US economy.

The measure of employee output per hour slumped 0.5 per cent annualised rate in the three months through June declining 0.6 per cent in the prior quarter, a Labour Department report showed yesterday in Washington.

According to a Bloomberg survey, the median forecast called for a 0.4 per cent gain. Expenses per worker were up at a 2 per cent pace after being revised a decline in the previous period.

Productivity against a year earlier was down for the first time since 2013 with subdued global markets forcing companies to scale back capital investment plans.

According to commentators, faced with deteriorating corporate profits and an absence of faster economic growth, the risk was that businesses might start ratcheting back the hiring they had relied on to meet demand.

''Productivity continues to be quite disappointing,'' said Jim O'Sullivan, chief US economist at High Frequency Economics Ltd in Valhalla, New York, Bloomberg reported. ''To the extent we do start seeing better GDP numbers, unless employment accelerates, we should start seeing better productivity numbers.''

According to estimates of economists productivity ranged from a decrease of 0.4 per cent to a 1.1 per cent gain.

Meanwhile, Joseph LaVorgna, chief economist at Deutsche Bank Securities in New York said, ''The reason the economy has still been able to expand is because of labour input. Firms are hiring people at a reasonably healthy rate,'' Reuters reported.

''However, we do not believe this can last, because strong hiring in the face of weak productivity necessarily implies a further deterioration in corporate profit margins.''

Corporate profits had been sluggish, in part, due to companies dealing with the lagging impact of a strong dollar and lower oil prices. After-tax profits rose at a 8.1 per cent rate in the first quarter after falling 5.3 per cent in 2015.





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