U.S. Second-Quarter Productivity Rose at Revised 1.5% Rate -- Update

U.S. worker productivity grew faster than initially estimated in the second quarter, though it has remained sluggish during the slow but sturdy economic expansion.

Nonfarm business-sector productivity, measured as the goods and services produced per hour worked, increased at a 1.5% seasonally adjusted annual rate in the second quarter, up from a 0.1% growth rate in the first quarter, the Labor Department said Thursday.

Economists surveyed by The Wall Street Journal had expected a 1.4% revised second-quarter growth rate from a previously reported 0.9% rate.

Output rose at a 4% rate from the first quarter, while hours worked were up at a 2.5% pace.

Compared with a year earlier, productivity was up 1.3% in the second quarter. Productivity growth averaged 1.2% a year from 2007 through 2016.

The second-quarter productivity growth serves as an "encouraging sign for longer-term growth, but the news will hardly be market moving," said Scott Anderson, chief economist at Bank of the West, noting lower unit labor cost growth will keep a lid on consumer inflation.

Unit labor costs at nonfarm businesses rose at a 0.2% revised rate in the second quarter from an initial estimate of 0.6%. From a year earlier, unit labor costs fell 0.2%.

It is unclear whether the second-quarter pickup in productivity signals a broader, sustained shift.

Rapid productivity gains, as seen during the information technology-fueled boom of the late 1990s and early 2000s, can boost household incomes and economic growth.

Weaker productivity throughout the current economic expansion is one factor that is likely held down worker wages in the U.S. Annual wage gains have been stuck near 2.5%, even though the unemployment rate has been hovering near a 16-year low in recent months.

Weak productivity gains can put pressure on business profits and makes it difficult for employers to justify wage increases.

Federal Reserve Bank of San Francisco President John Williams said in an August speech to the Economic Club of Las Vegas that longer-term challenges to economic growth persist.

"These include a sea change in demographic factors like slowing population and labor force growth and a downshift in productivity growth, " Mr. Williams said.

The Labor Department's report on labor productivity and costs can be accessed at: https://www.bls.gov/news.release/prod2.nr0.htm

Write to Sarah Chaney at sarah.chaney@wsj.com

(END) Dow Jones Newswires

September 07, 2017 11:13 ET (15:13 GMT)