The numbers: U.S. nonfarm worker productivity fell at a 4.6% annual clip in the second quarter, the government said Tuesday.
Economists surveyed by MarketWatch had projected a 4.3% decline.
This is the second straight decline quarterly decline in productivity, which measures output per hour. In the first quarter, productivity fell at a steep 7.4% rate, the largest decline in 75 years.
Over the past 12 months, U.S. productivity fell at a record 2.5% rate.
Key details: Workers worked more and produced less in the second quarter. Hours worked ran a 2.6% rate in the second quarter, down from a 5.3% rate in first quarter.
Output in the second quarter fell at a 2.1% rate after a 2.5% decline in the first three months of the year.
Unit-labor costs, a key measure of wages, jumped at 10.6% rate, down only slightly from a revised 12.8% rate in the first quarter.
Year-over-year unit labor costs rose 9.5% in the second quarter, the fastest pace since the first quarter of 1982.
Big picture: Productivity is hard to measure in normal times, so economists are wary of the data in the post-pandemic era. Still, economists are troubled because productivity low productivity leads to a host of bad outcomes – higher inflation, lower worker wage growth and a slower economy, said Nela Richardson, chief economist at ADP.
Looking ahead: “One way for companies to protect their profit margins against rising wage bills is to become more productive, which helps keep a lid on unit labor costs. However, today’s data indicates that productivity won’t act as a buffer. We expect elevated wage growth will continue to exert downward pressure on companies’ profit margins in coming quarters as companies’ pricing power moderates in a slower demand environment,” Lydia Boussour, economist at Oxford Economics.
Market reaction: U.S. stocks DJIA, -0.26% SPX, -0.54% opened lower on Tuesday after oil futures turned higher on news reports that Russia was halting crude flows on one pipeline to Europe.