US productivity improved at ho-hum 1.5 pct. rate in spring

WASHINGTON — U.S. workers’ productivity rose a bit more this spring than initially reported, but the gains were relatively weak and a key reason why recent economic growth has been modest.

The Labor Department said Thursday that productivity grew at a revised annual rate of 1.5 per cent in the April-June quarter. That’s up from an initial estimate of a 0.9 per cent increase and comes after a slight 0.1 per cent rate of increase in the first quarter. Labor costs increased at just a rate of just 0.2 per cent in the second quarter, a major drop-off from a 4.8 per cent growth rate in the first quarter.

Productivity, the amount of output per hour of work, has been weak throughout the nine-year recovery. Many economists say this has stifled pay raises and broader economic growth.

In 2016, labour productivity declined for the first time in 34 years. It ticked down 0.1 per cent. This followed a lacklustre productivity increase of 1.3 per cent in 2015.

Relative to 2009, productivity has been improving at annual average of roughly 1 per cent. This modest gain has contributed to relatively sluggish economic growth overall, as gross domestic product has been increasing at about 2 per cent in recent years. Growth is largely determined by two factors: the influx of new workers and how much gets produced for each hour worked.

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Aides to President Donald Trump have said that corporate tax cuts will increase productivity, because they’ll encourage companies to make new investments in capital goods that make workers more efficient. But most economists doubt that growth can hit the 3 per cent target set by the president.

Josh Boak, The Associated Press