Productivity in the United States suffered its biggest drop on record in the second quarter. At the same time, businesses have seen the fastest rise in the cost of labor since 1982, contributing to the high inflation the country is experiencing.
From April to June, productivity fell 2.5% compared to the same period last year, according to the preliminary estimate released Tuesday by the Bureau of Labor Statistics (BLS).
This is the largest year-on-year decline on record since data began to be collected in 1948. In fact, production has certainly increased by 1.5%, but much less than the number of hours worked, which increased by 4.1%.
Labor cost explosion
This drop in productivity, together with the rise in wages linked to the shortage of labor, has generated for companies the largest increase in the cost of labor in a period of 40 years: +9.5%.
Productivity “fell for the second consecutive quarter as companies continued to hire at a brisk pace and output continued to fall,” Lydia Boussour, an economist at Oxford Economics, said in a note.
Employment returns to pre-pandemic levels
As for the increase in labor costs, he points out that “since companies face a very tight labor market, they cannot depend on productivity gains to mitigate the impact of labor cost pressures. ‘Work’, reducing its margins”.
The labor market showed unexpected dynamism in July and the country has now recovered the 22 million jobs destroyed by the pandemic, while the unemployment rate has fallen to 3.5%, as in February 2020.
The labor shortage pushes companies to offer higher salaries to attract candidates and keep their employees.
This helped boost prices and inflation hit a new 40-year high in June at 9.1% year-on-year. July data will be released on Wednesday.
Source: BFM TV
