Workers’ productivity in the United States declined at the fastest annual rate since the Labor Department began tracking it in 1948, while unit labor expenses rose faster, implying that strong wage pressures will continue to keep inflation high.

Nonfarm productivity, which measures hourly production per worker, declined 2.5% year on year, according to the agency on Tuesday. It also fell dramatically in the second quarter, falling by 4.6% on an annualized basis after falling by an upwardly revised 7.4% in the first three months of the year.

Reuters polled economists, who predicted a 4.7% drop in productivity between April and June.

Large changes in the makeup of the US labor force in the aftermath of the COVID-19 epidemic have made it more difficult to evaluate underlying productivity growth, which some economists estimate to be about 1.0% or less, complicating the Federal Reserve’s fight against inflation.

In the second quarter, hours worked increased by 2.6%.

Unit labor costs, or the cost of labor per one unit of production, increased at a 10.8% annual pace. This followed a 12.7% increase in the first quarter.

Unit labor costs climbed by 9.5% year on year. Wage growth is being boosted by a severe labor scarcity. At the end of June, there were 10.7 million job opportunities.

Hourly pay increased by 5.7% in the second quarter and by 6.7% compared to the second quarter of 2021.

Source: Reuters

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