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Productivity Level Rose in the Second Quarter

August 8, 2014 By Troy Rubenson 1 Comment

Productivity is one of the most important variables in economics. By measuring the output of hourly worker effort, we can have an indication of how the whole economy is performing. The economic recession affected the productivity levels, even though it was merely a product of bad financial decisions.

The Department of Labor announced on Friday that the productivity level rose at a 2.5 percent annual rate. This is good news because during the first quarter, the same indicator contracted with 4.5 percent. The suffered in the first quarter was the biggest in the last 31 years, offering strong reasons for worrying. Over the last 12 months, though, the productivity level rose with 1.2 percent.

Productivity levels are instable, so economists choose to analyze longer periods to have a grasp of a meaningful trend. A Moody’s representative say that the last eight quarters did not show an impressive productivity growth level. With only 0.7 percent growth over the last two years, the productivity level is lower than expected by economists.

Even if the economy rises, many American families still feel the 2007-2009 recession effects, according to a Fed study released on Thursday.

The productivity level rose mostly due to the manufacturing sector

During the second quarter, the productivity level was predicted to rise with 1.5 percent, so a 2.5 percent is great news, but we have to see a longer trend before taking it for granted. Overall, the economy grew at a rate of 4 percent after it decreased at a 2.1 percent rate during the first quarter, Fox News reports.

productivity level rose in the second quarter

Overall, the economy starts recovering, even if not so fast as economists expected. Over 244,000 new jobs have been added in the last six months, making the two quarters the best in the last eight years. Labor costs grew in the last 12 months by just 1.9 percent, even if the numbers are volatile taken per quarter. For example, the first quarter of 2014 saw an 11.8 percent rise in labor costs.

“While greater than 2013, this should not be a problematic increase in labor costs for most firms,” said Doug Handler, IHS Global Insight’s chief U.S. economist, USA Today reports.

The productivity level rose generally, but manufacturing productivity has seen the highest growth with an annual 3.6 percent rate. Handler suggests to keep an eye on labor productivity in the service sector will change over the following period, as it lagged than the one from other sectors.

Filed Under: Business Tagged With: economic recession, economic recovery, macroeconomics, productivity

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