US labour productivity is underrated and this is why

Labour productivity in the United States continued to decline in the spring of this year, to record a third consecutive quarterly decline, which could jeopardize the growth rate of wages in the whole economy in the coming years. This was stated by the Ministry of Labour.

The data showed that the level of labor productivity in the agricultural sector - the gauge of production of goods and services for one hour of work - decreased in the 2nd quarter by 0.5% compared to the 1st quarter (seasonally adjusted). The reason for this change has been a more rapid growth in the hours worked than in output. Recall that in the first quarter productivity fell by 0.6%.

In annual terms, the labor productivity decreased by 0.4%, recording the first annual decline in three years.

Unit labor costs among the non-agricultural enterprises in the second quarter rose by 2.0% after falling 0.2% in the first quarter (revised from + 4.5%). Compared to 2015, unit labor costs rose by 2.1% Economists had expected productivity to rise by 0.5%, while labor costs to increase by 1.8%.

The rate of growth of labor productivity is a key factor in determining how quickly wages and the economy can grow as a whole. Strong productivity gains, as noted in the late 1990s and early 2000s, can lead to sustainable economic growth and wage inflation. But sluggish growth performance may restrain wage growth and economic expansion. According to the data, average annual productivity growth from 2007 to 2015 was 1.3%, which is less than half the pace recorded from 2000 to 2007.