US productivity increases in 2nd quarter

According to reports, US productivity increased at a moderate speed in the April-June quarter for the reason that growth increased and hiring continued to be steady. According to the Labor Department, worker productivity rose at a seasonally adjusted yearly rate of 1.3% that increased from a fall of 1.1% in the first quarter.

Decline in the first quarter was revised quite higher from an earlier estimate of a decline of 3.1%.

The second quarter recovery took place mainly since the economy grew rapidly. It grew at a 2.3% yearly rate, compared with weak 0.6% growth in the first quarter. Productivity is a measure of efficiency of workers. It gauges the output of services and goods for each hour spent working.

Reports say that weak productivity growth could lead to increased hiring for brief period, for the reason that companies need to add more workers in order to increase output. However, it also becomes a hurdle in wage growth. With help of faster productivity growth, employers increase pay without increasing inflation.

According to Gennadiy Goldberg, an economist at TD Securities in New York, “What it means is that inflation could be more problematic down the road, but we haven’t seen it yet. It’s something to think about long term”.

As per reports, since the recession, productivity growth has been slow. This is the main reason behind the weak recovery. Productivity has increased only 0.3% in the earlier year. It was much less than the average of 2.2% in the long run.