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US worker productivity rises at 1.2% rate in Q2, labour costs under control

To retain 3% real GDP growth, productivity growth will have to exceed avg growth of 2.1%

Reuters  |  Washington 

Workers build the roof of a single axel towable Pioneer traditional recreational vehicle at the Thor Industries Heartland RV Assembly Plant in Elkhart, Indiana. (Photo: Reuters)
File photo of workers build the roof of a single axel towable Pioneer traditional recreational vehicle at the Thor Industries Heartland RV Assembly Plant in Elkhart, Indiana. (Photo: Reuters)

rose more than expected in the second quarter as hours increased at their fastest pace in 1-1/2 years, keeping labour costs under control.

The Labour Department said on Wednesday that nonfarm productivity, which measures hourly output per worker, increased at a 0.9 per cent annualised rate in the April-June period. First-quarter was revised to show it edging up at a 0.1 per cent pace instead of being unchanged as previously reported.

Compared to the second quarter of 2016, increased at a 1.2 per cent rate, the strongest performance in two years. Economists had forecast increasing at a 0.7 per cent pace in the second quarter.

With rising, unit labour costs, the price of labour per single unit of output, increased at only a 0.6 per cent pace in the second quarter after jumping at a 5.4 per cent rate in the January-March period.

Compared to the second quarter of 2016, unit labour costs fell at a 0.2 per cent rate, pointing to muted Coming on the heels of a recent moderation in price pressures, the retreat in unit labour costs may worry some officials as they contemplate further tightening.

Prices for were higher in early morning trading while were lower. The gained against a basket of

The government also revised data going back to 2014, in line with recent revisions to gross domestic product figures. Those revisions showed falling 0.1 per cent in 2016, the first drop since 1982.

increased at an average annual rate of 1.2 per cent from 2007 to 2016, below its long-term rate of 2.1 per cent from 1947 to 2016, indicating that the economy's potential rate of growth has declined.

Anemic is bad news for President who has pledged to boost annual economic growth to 3.0 percent through tax cuts, and a rollback of regulation.

"To reattain 3 per cent real growth with the demographics the US is facing, growth will have to exceed its long-run average growth rate of 2.1 per cent, and we are far short of attaining such a pace," said John Ryding, chief economist at RDQ Economics in New York.

Full employment

Economists blame soft on a shortage of as retire as well as the impact of rampant in some parts of the country. A report on Tuesday showed surging to a record 6.2 million in June.

The Monetary Fund in June cut its growth forecasts for the to 2.1 per cent for both 2017 and 2018. The said the Trump administration was unlikely to achieve its 3 per cent growth goal over a sustained period, partly because the labour market is at

Other economists also argue that low capital expenditure, which they say has resulted in a sharp drop in the capital-to-labour ratio, is holding down

There is also a perception that is being inaccurately measured, especially on the information technology side. Annual economic growth has not surpassed 3 percent or more since 2005. Gross domestic product expanded at a 2.6 per cent annualised rate in the second quarter.

Low has also been blamed for sluggish wage growth even as companies continue to hire more to maintain output, pushing the labour market near

Hours worked increased at a rate of 2.5 per cent in the April-June period, the quickest pace since the fourth quarter of 2015, and followed a 1.6 per cent pace increase in the first quarter. As a result, output per worker surged at a 3.4 per cent rate, the fastest since the first quarter of 2015, after rising at a 1.8 per cent pace at the start of the year.

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