US worker productivity up 1.6 pct. in 2nd quarter

WASHINGTON (AP) ? U.S. workers increased their productivity in the April-June quarter after companies scaled back hiring and got more out of their existing work forces. The gain was modest and suggests some companies may have to hire more workers if demand picks up.

The Labor Department said Wednesday that productivity rose at an annual rate of 1.6 percent in the second quarter. It fell 0.5 percent in the first quarter, a smaller decline than first estimated.

Productivity is the amount of output per hour worked. Rising productivity can slow job creation because it means companies are getting more from their current staff and don't need to add workers.

But productivity is increasing at a relatively weak pace. It is up only 1.1 percent compared to a year ago. Since 1947, productivity gains have averaged 2.2 percent a year.

Labor costs rose 1.7 percent. That's below the first quarter's 5.6 percent increase, a much bigger gain than first estimated.

One reason productivity improved is that hiring slowed in the second quarter. Employers added an average of only 75,000 jobs a month from April through June. That's down from an average of 226,000 a month in the first quarter.

The total amount of time U.S. workers spent on the job rose only 0.4 percent. That's down from 3.2 percent in the first quarter.

At the same time, total output rose 2 percent. When output grows faster than hours worked, productivity rises.

U.S. employers added 163,000 jobs in July, the Labor Department said last week. The unemployment rate edged up to 8.3 percent. Hiring probably won't accelerate from that level unless growth picks up or productivity slows, economists say.

Higher productivity boosts corporate profits, but can slow hiring in the short run. In the longer run, higher productivity also raises living standards for workers. It allows companies to increase workers' pay without pushing up inflation.

Productivity grew only 0.7 percent last year after rising sharply in 2010. The main reason productivity soared in 2010 was that it followed the worst recession in decades, when employers laid off millions of workers.

Economists said the trend is typical during and after a recession. Companies tend to shed workers in the face of falling demand and increase output from a smaller work force. Once the economy starts to grow, demand rises and companies eventually must add workers if they want to keep up.

Associated Press

Source: http://hosted2.ap.org/APDEFAULT/f70471f764144b2fab526d39972d37b3/Article_2012-08-08-Productivity/id-0de2208331204e38bb3cc21f6333af3b

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