U.S. nonfarm productivity unexpectedly fell in the second quarter, pointing to sustained weakness that could raise concerns about corporate profits and companies’ ability to maintain their recent robust pace of hiring, Reuters reports.
The Labor Department says that productivity, which measures hourly output per worker, dropped at a 0.5% annual rate in the April-June period. It was the third consecutive quarterly decline.
“The reason the economy has still been able to expand is because of labor input. Firms are hiring people at a reasonably healthy rate,” Joseph LaVorgna, chief economist at Deutsche Bank Securities in New York tells Reuters
“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.”
Productivity fell at an unrevised 0.6% rate in the first quarter. Economists polled by Reuters had forecast productivity rising at a 0.4% rate in the second quarter.
