Productivity on the Rise
Aug. 9, 2005 — -- A report from the U.S. Labor Department out this morning says that worker productivity in the U.S. increased by 2.2 percent during the April-to-June time period. That's the slowest increase in output per hour -- the standard measure of productivity -- since last summer.
Today's number was slightly higher than the consensus estimate of a 2 percent increase in productivity. This is the first of two readings on productivity in the second quarter.
What does that mean? American businesses enjoyed huge gains in productivity after the 2001 recession, as managers were reluctant to hire back laid-off workers even as the economy was growing. That forced American workers to work harder to get their jobs done.
As productivity gains begin to wane, expect to see hiring pick up (a trend we have seen during the past few months).
How much does this matter? This is moderately important. Today's productivity report will likely be lost amongst the hubbub of the Federal Reserve rate hike, which was announced this afternoon.
Definition: Productivity is a measure of worker output per hour. In its simplest form, imagine that all the workers in the U.S. economy make widgets. When the average worker's output improves from 100 widgets per hour to 110 widgets per hour, her productivity has increased 10 percent.
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