Overview
- The Labor Department reported that nonfarm labor productivity rose at a 1.4% annualized rate in the second quarter after a upwardly revised 0.8% gain in the first quarter, with output up 1.7% and hours worked up 0.3%.
- Unit labor costs increased 1.3% in Q2 while inflation-adjusted hourly compensation fell about 3.1%, and the labor share of nominal GDP dropped to a record low of 52.9%.
- The BLS release on Thursday is drawing a link between the surge in measured productivity and heavier business spending on artificial intelligence, data centers, and chips that let firms produce more with fewer hours.
- Industry reports say efficiency and AI integration drove more than 10,000 job cuts at five large U.S. banks in Q2, a mechanism that raised measured productivity but reduced workers' pay and job security.
- Productivity has averaged roughly 2.1% growth since late 2019, a trend that could ease wage-driven inflation for policymakers while posing risks to consumer demand and the distribution of economic gains.