Productivity falls sharply in second quarter

In New York City, workers trowel the poured mixture of a slab in the IceStone factory, a manufacturer of recycled glass countertops and surfaces.

The Labor Department said on Tuesday that the U.S. worker productivity fell sharply in the second quarter and posted a record decline on an annual basis.

Nonfarm productivity, measured hourly output per worker, fell to 4.6% last quarter, after having declined by 7.4% in the first three months of the year, according to the report.

Economists polled by Reuters had predicted that productivity would decline at a 4.7% rate in the April-June period.

The Federal Reserve's fight against inflation is harder because of the large shifts in the composition of the workforce since the COVID-19 pandemic and made it harder to measure underlying productivity growth, which some economists put at about 1.0% or less.

Hours worked increased at a 2.6% rate in the second quarter.

Unit labor costs - the price of labor per single unit of output - accelerated at a 10.8% rate. It was followed by a 9.3% expansion rate in the first quarter.

Labor costs increased by 9.5% from a year ago. An acute shortage of workers is boosting wage growth. There were 10.7 million job openings at the end of June.

In the second quarter, hourly compensation rose at a 5.7% rate. Compensation increased at a 6.7% rate compared to the second quarter of 2021.