SILVER SPRING, Md. (AP) – US productivity increased at a rate of 7.3% in the second quarter, as the number of hours worked fell by almost half, the largest drop-off since the government began tracking the data more then 70 years ago.
The Department of Labor said Friday that output fell 38.9%, also the largest decline ever recorded as working hours fell 43%, with the coronavirus pandemic causing economic damage across the US
The increase in productivity was the largest since 2009. Labor costs also jumped, with 12.2% increase.
Friday’s report is the first estimate of second-quarter productivity and follows the first-quarter decline of 0.3%. The rise in labor costs, the largest since 2014, follows a 9.8% increase in the January-March quarter.
Defined as the amount of output per hour worked, productivity is the key to raising living standards, and the slow pace of growth in recent years has been a major reason that wage gains have stalled. Productivity was mostly at the expense of the record-breaking 11-year expansion that followed the Great Recession, confusing economists.
From 2000 to 2007, the year the Great Recession began, annual productivity gains averaged 2.7%. But since then, productivity has declined to about half that rate, and increased at an average annual rate of 1.4% from 2007 to 2019. The 2019 rate of 1.9% brought some optimism to that productivity. the rise was, but the coronavirus pandemic struck in the first quarter of 2020, eroding the economy and taking just about every economic indicator with it.
Economists have warned that the economic disruption caused by the coronavirus is likely to hamper productivity in coming quarters.
Last month, the government reported a 32.9% surprise in second-quarter gross domestic product, the value of goods the country produced in the April-June quarter. It was the sharpest such drop on records dating back to 1947, and almost entirely related to the outbreak of the coronavirus pandemic, which temporarily and permanently shut down the company, sending millions of workers to the unemployment line.
The Trump administration has predicted a third-quarter economic rebound, but many economists think the economy may not fully recover until the virus is most defeated.
The government will issue a second productivity estimate next month.
