U.S. productivity rises 1.6% in 2Q

U.S. productivity rebounded in the second quarter, posting a solid 1.6% gain as companies generated more goods and services, even though there was little change in the number of hours their employees worked. The Labor Department figures released this morning for the three-month period that ended June 30 contrast sharply with the first quarter’s revised decline in productivity of 0.5%. Productivity measures the goods and services generated by the economy. In the long run, higher productivity usually results in higher profits for businesses and bigger paychecks for workers. The increase in second-quarter productivity was spurred by a 2% gain in the amount of goods and services produced, known as output, and a much slower 0.4% increase in hours worked. Productivity rises when output increases faster than the amount of hours workers spend on the job. The number of hours worked dipped considerably in the second quarter from the 3.2% increase in the first three months of the year. The drop-off likely reflects the decline in hiring during the second quarter. Hourly wages rose 3.3% in the second quarter, or 2.6% when adjusted for inflation. Still, workers have actually seen a 0.5% decline in the inflation-adjusted value of their paychecks over the past year. That helps explain why the U.S. economy is growing so slowly, economists say, as consumer spending accounts for about 70% of economic activity. Get more details from today’s report here.