August 11, 2009

Productivity gains as work hours fall

The U.S. Labor Department said non-farm productivity shot up in the second quarter, as work hours continued to fall faster than output.

Productivity gained 6.4 percent on an annual basis in the non-farm business sector, the sharpest gain since the third quarter of 2003. Per unit labor costs, meanwhile, plummeted 5.8 percent, the steepest drop in eight years.

By comparison, productivity outpaced labor costs in the first quarter, but production gained a revised 0.3 percent, while unit costs shrank a revised 2.7 percent.

The figures cast a mixed message on the economy, possibly indicating massive layoffs will slow or end as costs per unit have dropped. On the other hand, real hourly compensation dropped 1.1 percent, which will impact consumer spending.