Worker productivity likely rebounded in April-June quarter as growth recovered

Economic IndicatorsAssociated Press

The Labor Department reports productivity figures for the April-June quarter. The report will be issued Friday at 8:30 a.m. Eastern.

PRODUCTIVITY REBOUND: Economists forecast that productivity rose at an annual rate of 1.5 percent in the second quarter, according to a survey by data firm FactSet.

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That would represent a big rebound from the contraction of 3.2 percent that occurred in the first quarter. That decline occurred mostly because economic growth shrank at a 2.1 percent annual rate.

But the government said last month that growth resumed at a 4 percent annual rate in the second quarter. That should lift productivity.

UNPRODUCTIVE: Productivity measures output per hour of work. Greater productivity increases living standards because it enables companies to pay their workers more without having to increases prices, which can boost inflation.

However, in the five years since the recession ended, productivity growth has been relatively weak. That has raised concerns among some analysts that the U.S. economy may not be able to grow as quickly as it has in the past.

In the short run, however, slow productivity can boost hiring. That's because companies need to hire more workers to lift output. Employers have added an average of 244,000 jobs a month in the last six months, the best six-month pace in eight years.

Labor costs, which are also included in the report, likely grew 1.2 percent in the April-June quarter, according to economists surveyed by FactSet. That would be much lower than in the first quarter, when they jumped 5.7 percent.

The Federal Reserve keeps close watch on productivity and labor costs for any signs that inflation may be accelerating.

Despite the first quarter increase, labor cost increases have been tame throughout most of the recovery. Wages for most workers have barely kept up with inflation since the recession ended.