Wednesday, August 12, 2009

Output per Hour Up, but Hours Slashed

More news from yesterday...

With an article headline like this "Productivity rises 6.4%, Fastest rate in Six Years" you'd think the news was good. And the beginning of the Marketwatch article seems to convey a positive message:
U.S. companies slashed their workers' hours in the second quarter, boosting the productivity of the workplace to an annualized rate of 6.4%, the Labor Department reported Tuesday. It was the fastest increase in productivity in the nonfarm business sector in nearly six years. Economists surveyed by MarketWatch had been looking for a gain of 5.4%.
Was hourly output up 6.4% annualized in Q2? Yes. But OVERALL output was down again and at an increasing rate (hours were slashed).

Back to Marketwatch with some more sobering news:
Unit labor costs -- a key indicator of inflationary pressures -- plunged at a 5.8% rate, the largest decline in nine years and slightly wider than the 5.3% decline expected by economists. Hourly compensation rose just 0.2% in the second quarter. After inflation, real hourly compensation sank 1.1%. Read the full government report.

"U.S. businesses have slashed employment aggressively in order to cut costs and to streamline their businesses," wrote Harm Bandholz, an economist for UniCredit Markets.
Source: BLS