- Janet Yellen, Fed Chairwoman
US non-farm productivity increased at a moderate pace in the second quarter as growth rose, while hiring remained steady. The productivity of nonfarm workers, measured as the output of goods and services per hour worked, climbed at a seasonally adjusted annual rate of 1.3% in the second quarter, according to the Labor Department. Productivity picked up 0.3% in the past year, far below the long-term average of 2.2%. Productivity growth has been weak since the recession, the key reason why the recovery has been sluggish. The weak productivity growth in recent years has been a puzzle for economists. It has climbed an average of just 1.3% a year from 2007 through 2014, far below the strong 2.8% average annual growth that was seen from 1995 through 2004.
Labour costs, meanwhile, climbed just 0.5% in the second quarter, a sign that wages are increasing only modestly. Labour costs rose 2.3% in the first quarter, considerably lower than the previous estimate of 6.7%. Rising labour costs can be a forerunner of inflation. However, they have been mostly stagnant since the recession. The Fed carefully monitors productivity and labour costs for signs that inflation is nearing higher levels. The increase in productivity and moderation in labour costs was to be expected given the rebound in GDP last quarter. The world's number one economy grew 2.3%.
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