US productivity slumped for a second-straight quarter as the economy shrank, driving another surge in labour costs that risks keeping inflation elevated.
Productivity, or nonfarm business employee output per hour, decreased at a 4.6 per cent annual rate in the second quarter after falling at a 7.4 per cent pace in the previous three months, Labor Department figures showed on Tuesday. That marked the weakest back-to-back readings in data back to 1947.
With the drop in productivity, unit labour costs jumped at a 10.8 per cent rate in the second quarter from the prior three months, and increased 9.5 per cent from a year earlier. Hourly compensation advanced 5.7 per cent from the prior quarter.
Labour costs are the biggest expense for many businesses, so firms often adopt new technologies and upgrade equipment to make their workers more productive, helping blunt the inflationary impact of higher wages.