US productivity fell unexpectedly in the second quarter for the first time since late 2008, the Labor Department said Tuesday, reflecting a slowing economy.
Non-farm productivity declined 0.9 percent in the April-June period, the first fall since the last quarter of 2008, when productivity contracted 0.1 percent, the department said.
“The decline in output per hour follows five quarters of strong productivity growth,” it said in a report.
Most economists had expected labor productivity — based output of workers per hour — to rise 0.1 percent from a upwardly revised 3.9 percent growth in the January-March period.
Labor costs increased 0.2 percent in the second quarter, the first rise in a year.
Markets had expected labor costs to increase 1.4 percent.
“Economic reactions to declines in productivity are not pleasant,” analysts at Briefing.com said in a report. “The data suggest that firms are oversupplied with labor for the amount of output they are creating,” they said. At the very least, they said, employment would hold at its current level without any motivation from firms to hire more workers.
Government data last week showed the United States shedding more jobs than expected in July, heightening fears that the world’s largest economy will take years to fully recover from a crippling recession.
Some 131,000 jobs were lost and the unemployment rate remained stuck at 9.5 percent last month, officials said, as federal and local governments slashed jobs.
The private sector was unable to offset a massive government layoff of 143,000 census-takers, with firms creating only a modest 71,000 jobs last month.
Barclays analysts said recent swings in US productivity reflected “the dynamics of the cycle — initially a very strong recovery in output, relative to hours worked, followed by a pickup in hours as output growth eased — rather than any structural shifts. “While compensation and labor cost numbers remain indicative of only a mild recovery in the labor market thus far, unit labor cost growth is likely to pick up further in the coming quarters as continued increases in hours and employment translate into soft productivity growth and rising compensation per hour,” said Barclays analyst Peter Newland.