US Productivity Grew at 2.2% Rate in Spring

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ProductivityBy MARTIN CRUTSINGER, AP Economics Writer

WASHINGTON (AP) - U.S. companies got more output from their workers this spring than initially thought. Productivity rose at a modest 2.2 percent annual rate in the April-June quarter, largely because employers cut back sharply on hiring.

Most economists expect productivity will slow later this year, a trend that could boost hiring.

The Labor Department said Wednesday that productivity in the second quarter was better than its initial estimate of a 1.6 percent gain.

The main reason for the increase was the government revised growth in the second quarter to an annual rate of 1.7 percent, up from an initial estimate of 1.5 percent.

That led to more output, which boosted productivity. Productivity is the amount of output per hour worked.

Labor costs rose at an annual rate of 1.5 percent, slightly lower than the 1.7 percent initially estimated.

Rising productivity can boost corporate profits. It can also slow job creation if it means companies are getting more from their current staff and don't need to add workers.

Still, there are limits to how much companies can squeeze from their staffs. When that happens, productivity slows and company typically must hire more workers to keep pace with demand.

Economists said they expected productivity will slow from the spring pace for the rest of this year and through 2013. Michael Englund, chief economist at Action Economics, said he was looking for productivity growth at a slight 1 percent or less in 2013.

Peter Newland, senior economist at Barclays, said productivity should slow as companies increase hiring in coming months.

Productivity declined 0.5 percent in the January-March quarter. One reason productivity improved in the second quarter is hiring slowed to just 75,000 jobs a month from April through June. That's down from an average of 226,000 a month in the first quarter.

U.S. employers added 163,000 jobs in July, the best month of hiring in five months. 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.

The government will release the August employment report on Friday. Economists forecast that the economy added 135,000 jobs last month, and the unemployment rate stayed at 8.3 percent.

The Federal Reserve closely follows changes in productivity and labor costs to make sure that inflation pressures are not getting out of control.

Over the past year, productivity has risen 1.2 percent. That is far below the 3 percent average productivity growth turned in during 2009 and 2010. Those gains were a result of massive job layoffs during the recession as companies slashed costs in the face of falling demand.

Economists said higher productivity 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.

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12 Comments

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toosmart4u

As long as our companies are paying employee health insurance we will never be able to compete in the world market. We need to upgrade the Obamacare not end it as the GOP would like.

September 06 2012 at 3:28 AM Report abuse rate up rate down Reply
dquandle

while real wages fell by say what, 10%? over the past couple of years.
Great news. This is all sure to restart the economy like wildfire. If we could only get people to each work 24 hours a day for no pay, we'd all be $hittin' in high cotton in no time.

September 06 2012 at 2:40 AM Report abuse rate up rate down Reply
jacobsgold

I am starting to believe that "blue collar" is stupid spelled backwards.

You fire the workers, blue & white, and have the remaining ones make up the work. The corporations profit and the worker bees get screwed. Romney ISN'T president remember? This is happening under Obama. I know, George Bush is behind a curtain pulling the strings forcing Obama to screw up. I am the great and powerful OZ. lol

September 06 2012 at 1:11 AM Report abuse rate up rate down Reply
kafienkarl

Its all or none for the black and white thinkers on the right. Bush had 8 yrs. and he delivered the worst recession in generations, two unfunded wars, various stimulus plans unfunded, MEDiCARE D a very expensive social program, bailouts, mortgage mess and high oil prices. Many on the right flicked a switch January 2009 and turned the biggest since the great depression. Just January 2009 alone over 800,000 people became unemployed. Its not about worrying about the blame that's clear it's about being reasonable about the recovery. Now we are told Romney will be the savior. Really a private equity guy that changes his mind on every turn from abortion to gun control. He criticizes ObamaCare he himself is very proud of his signature healthcare plan that has individual mandate forcing all citizens of Massachusetts to purchase healthcare insurance or pay a TAX. Romeny himself said it was the model for the nation...a FACT. Ryan is another hypocrite talks down government and stimulus but votes for it. RomneyRyan are for the elite and people that believe in hiding their money to avoid taxation.

September 05 2012 at 10:34 PM Report abuse +1 rate up rate down Reply
1 reply to kafienkarl's comment
hairyreidisaliar

HATERS!

September 06 2012 at 12:10 AM Report abuse rate up rate down Reply
userabc21

What only 2.2% after a depression that should be higher just ask Mitt Romney........or George Bush

September 05 2012 at 8:26 PM Report abuse +1 rate up rate down Reply
ectullis

U.S. Productivity Grew at 2.2% Rate in Spring. Really?

September 05 2012 at 5:42 PM Report abuse rate up rate down Reply
kafienkarl

work more for less that's the corporation way. people really think Romney isn't going to side with the corporations,
Wall Street, financial elites/banks. right

September 05 2012 at 3:14 PM Report abuse +2 rate up rate down Reply
1 reply to kafienkarl's comment
hairyreidisaliar

OBAMA GETS CAMPAIGN FUNDS FROM CORPORATIONS, YOU LIBLOON!

September 06 2012 at 12:11 AM Report abuse +1 rate up rate down Reply
joey

http://money.cnn.com/2012/09/05/news/economy/august-jobs-report-expectation/index.html?eref=aol So What no JOBS!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!GONE 2012 WAKE UP

September 05 2012 at 1:46 PM Report abuse rate up rate down Reply
universallite

What was never mentioned is that quality always goes down during these periods. Yet people keep on buying and complaining that they do not make things like they once did.

September 05 2012 at 1:25 PM Report abuse +1 rate up rate down Reply
jdykbpl45

Spring has sprung. The grass has riz. Fal is near. Where is the economy? Ask Obama.

September 05 2012 at 11:43 AM Report abuse -8 rate up rate down Reply