Washington, DC, September 7--Productivity increased at a 1.8% annual rate in the quarter, down from 2.2% estimated a month ago, the Labor Department said in a revision to an earlier estimate. It's the slowest increase since the third quarter of 2004.
In the past year, productivity has increased 2.2%, the slowest rate in more than two years.
Unit labor costs - a key indicator of inflationary pressures - increased at a 2.5% rate in the quarter and 4.2% in the past year. It's the fastest year-over-year increase in unit labor costs since the third quarter of 2000.
In the second quarter, output increased 4.1% annualized while hours worked rose 2.2%. Hourly compensation increased 4.4%, but just 0.2% when adjusted for inflation.
The cyclical slowdown in productivity and the consequent rise in unit labor costs come as no surprise. The U.S. economy had enjoyed an historic boom in productivity in 2002, 2003 and 2004 that boosted corporate profits and kept both wages and inflation flat-lined.
Economists were expecting only a slight downward revision to 2.1% productivity from 2.2%, with unit labor costs expected to rise 1.5% instead of the 1.3% initially reported.
Productivity in the nonfinancial corporate sector soared at a 6.8% annual rate in the quarter and is up 6.3% in the past year. Unit labor costs in nonfinancial corporations fell 2.6% annualized, while unit profits jumped 43.2%. Real hourly compensation fell 0.1%.
In the manufacturing sector, productivity increased at a 3.6% annual rate in the quarter and is now up 4.6% in the past year. Unit labor costs increased 4.7% in the second quarter and are up 4.3% in the past year, the fastest growth in 4 1/2 years.
