US productivity rises by 7.3pc amid sharp drop in hours workedBusiness | 14 Aug 2020 9:51 pm
U.S. productivity grew at a 7.3 percent rate in the second quarter as the number of hours worked fell by nearly half, the biggest drop-off since the government started tracking the data more than 70 years ago.
The Labor Department said Friday that output dropped by 38.9 percent, also the biggest decline ever recorded as hours worked fell by 43 percent, with the coronavirus pandemic sowing economic damage throughout the U.S.
The increase in productivity was the largest since 2009. Labor costs also jumped by 12.2 percent.
Friday’s report is the first estimate of second-quarter productivity and follows the first quarter’s 0.3 percent decline. The rise in labor costs, the largest since 2014, follows a 9.8 percent increase in the January-March quarter.
Defined as the amount of output per hour of work, productivity is the key to rising living standards, and the slow pace of growth in recent years has been a major reason that wage gains have stalled. Productivity mostly lagged during the record long 11-year expansion that followed the Great Recession, confounding economists.
From 2000 to 2007, the year the Great Recession began, annual productivity gains averaged 2.7 percent. But since then, productivity has slowed to about half that pace, rising at an average annual rate of 1.4 percent from 2007 through 2019. The 2019 rate of 1.9 percent brought some optimism that productivity was on the rise, but the coronavirus pandemic hit in the first quarter of 2020, obliterating the economy and taking virtually every economic indicator down with it.
Economists have warned that the economic disruptions caused by the coronavirus would likely hinder productivity in coming quarters.-AP