Non-farm businesses in the United States lost some of their efficiency in the second quarter of the year but not as much as previously believed, the Labor Department reports.
In revised figures for April through June, the department said productivity among non-farm businesses responsible for about three-fourths of the nation's economic activity declined 1.4 percent, its first drop since 1986.Using preliminary figures, the government last month had put the decline at 1.7 percent. The revision upward reflects a larger 5.2 percent increase in the output of goods and services than the 4.7 percent rise first reported.
To achieve that increased output, businesses had to raise the number of hours worked by their employees by 6.6 percent.
Analysts said the increase in hours and conseqent decrease in productivity reflects a hiring boom in which employers are having to compete for less-skilled workers because of decade-low unemployment.
Hourly wages and benefits nominally rose at an annual rate of 4.2 percent in the second quarter. But after taking inflation into account, the buying power of each hour of work declined 0.6 percent, the first drop in real compensation for workers in a year.
The higher nominal wages and reduced productivity sent labor costs skyrocketing at an annual rate of 5.7 percent, compared with just a 0.1 percent increase the first quarter, the Labor Department said.
The April-June increase in labor costs was the largest quarterly gain since the fourth quarter in 1986, when it jumped 6.1 percent. However, labor costs are still only 2.9 percent above what they were a year ago, lower than the rate of general consumer price inflation.
Among manufacturers responsible for one-fourth of the economic activity, productivity improvements were slightly greater than previously reported, 3.6 percent compared with 3.5 percent for the quarter.
The output of goods coming off factory assembly lines was revised upward from 5.4 percent to 5.7 percent with only a 2 percent increase in the number of hours worked to achieve it.
Manufacturers also have been more successful than businesses as a whole in keeping a lid on wages and labor costs as workers laid off in the 1981-82 recession were eager to return to their factory jobs.
Wages and benefits among manufacturing workers nominally rose at an annual rate of 3 percent in the second quarter, reducing their buying power in real terms by 1.7 percent.
The higher productivity and relatively small increases in hourly wages and benefits enabled manufacturers to actually reduce their labor costs in the second quarter by 0.6 percent.
Measured in dollars, U.S. factories have outperformed the rest of the world in the past year in reducing labor costs, partly through the smallest wage increases of any industrial country last year.