Worker Productivity And Costs On The Rise

Output was respectable and hours worked dipped while compensation rose favorably, making for a positive second-quarter report headlined by a 2.3 percent annual growth rate for productivity matched by a 2.4 percent growth rate in unit labor costs. Output rose at a 1.9 percent rate in the quarter, down from 3.9 percent in the prior quarter but still favorable. Hours worked fell 0.4 percent which is in line with the slowing in output.

Compensation rose at a strong 4.8 percent clip in the second quarter which is in addition to a sharply upward revised 9.2 percent pace in the first quarter. The latter made for an upward revision to first-quarter unit labor costs which now stand at a 5.5 percent rate.

The decline in hours does raise the issue whether demand for labor will continue to rise. This topping is also hinted by this year's leveling in job openings though evidence of slowing in payroll growth is hard to find, at least yet. The gains in compensation, though negatives for corporate profits, are a strong positive for the consumer and are undoubtedly reflected in the strength underway in consumer spending.