The productivity of U.S. workers rebounded more than initially estimated in the second quarter as employers tried to protect profits.
According to revised figures from the Labor Department showed today in Washington, the measure of employee output per hour climbed at a 2.2 percent annual rate, after a 0.5 percent drop in the prior three months.
The biggest gains in productivity during the current expansion have probably already occurred as companies find they need to boost staff to further increase output and as investment in new equipment cools. At the same time, a weakening global economy is already hurting earnings, indicating businesses will continue to look for ways to operate more efficiently.
Rising productivity can boost corporate profits. It can also slow job creation if it means companies are getting more from their current staff and don't need to add workers.
There are limits to how much companies can squeeze from workers.
One reason productivity improved in the second quarter is hiring slowed to just 75,000 jobs a month from April through June. That's down from an average of 226,000 a month in the first quarter.
U.S. employers added 163,000 jobs in July, the best month of hiring in five months. The unemployment rate edged up to 8.3%. Hiring probably won't accelerate from that level unless economic growth picks up or productivity slows, economists say.
The government will release the August employment report on Friday. Economists forecast that the economy added 135,000 jobs last month, and the unemployment rate stayed at 8.3%.
"Companies did a good job on productivity during the crisis, and they will continue to try to increase productivity to boost profits, but it's not so easy to do that from here," said Harm Bandholz, chief economist at UniCredit Group in New York. "Investment spending in the U.S. has been lackluster, and it's certainly not getting better. The potential for increasing profits by cutting costs has come down quite a bit."
Productivity improvements may be harder to come by without the support of new technology. Corporate spending on equipment and software rose at a 4.7 percent pace last quarter, the weakest since the third quarter of 2009, according to Commerce Department figures.
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