(Reuters)

United States (US) worker productivity in the second quarter fell at its steepest pace on an annual basis since 1948, the Labor Department said today (August 9), while growth in unit labour costs accelerated, suggesting strong wage pressures will continue to help keep inflation elevated.

Nonfarm productivity, which measures hourly output per worker, fell at a 2.5 per cent pace from a year ago. It also declined sharply in the second quarter at a 4.6 per cent annualized rate, after having declined by an upwardly revised 7.4 per cent in the first three months of the year, the report showed.

Economists polled by Reuters had expected productivity would decline at a 4.7 per cent rate in the April-June period.

Large shifts in the composition of the US workforce in the wake of the COVID-19 pandemic have made it harder to measure underlying productivity growth, which some economists put about 1.0 per cent or less, making the Federal Reserve’s fight against inflation more difficult.

ACUTE WORKER SHORTAGE BOOSTING WAGE GROWTH

Hours worked increased at a 2.6 per cent rate in the second quarter.

Unit labour costs – the price of labour per single unit of output – rose at a 10.8 per cent rate. That followed a 12.7 per cent rate of growth in the first quarter.

Unit labour costs increased at a 9.5 per cent rate from a year ago. An acute shortage of workers is boosting wage growth. There were 10.7 million job openings at the end of June.

Hourly compensation rose at a 5.7 per cent rate in the second quarter and at a 6.7 per cent rate compared to the second quarter of 2021.