The productivity of U.S. workers rebounded in the second quarter as employers sought to protect earnings by squeezing more out of existing staff.
The measure of worker output per hour increased at a 1.6 percent annual rate following a revised 0.5 percent drop in the prior three months, figures from the Labor Department showed today in Washington. Expenses per employee climbed at a 1.7 percent rate after surging a revised 5.6 percent.
“Companies are finding it very hard to expand their profit margins, and that probably makes them more cautious and conservative,” said Julia Coronado, chief economist for North America at BNP Paribas in New York, who correctly projected the gain in productivity. “The fact they’re focused on productivity growth means we may not see that burst in hiring we really need to see right now.”
The drop in productivity at the start of 2012, paired with a slowdown in profits, is prompting companies to concentrate on enhancing efficiency, making it more difficult to spur a pickup in employment. A jobless rate that has held above 8 percent for more than three years is among reasons Federal Reserve policy makers said they are ready to take additional action if needed.
Stocks were little changed as the Bank of England cut its economic outlook. The Standard & Poor’s 500 Index rose less than 0.1 percent to 1,402.22 at the 4 p.m. close in New York.
BOE Governor Mervyn King signaled continued support for Prime Minister David Cameron’s budget squeeze as he cut forecasts for economic growth and said Britain’s recovery will be a “slow process.”
The median projection in a Bloomberg survey of 59 economists called for second-quarter U.S. productivity to rise 1.4 percent. Estimates ranged from gains of 0.9 percent to 2.9 percent.
Unit labor costs, which reflect changes in efficiency, were forecast to increase 0.5 percent, the survey median showed. The revised first-quarter jump was more than four times larger than the 1.3 percent advance previously reported, reflecting income revisions issued by the Commerce Department last month.
Productivity was up 1.1 percent compared with the second quarter of 2011. Labor costs rose 0.8 percent from a year earlier.
Among manufacturers, productivity increased at a 0.2 percent rate last quarter, and was up 2.9 percent over the past 12 months.
The U.S. economy cooled in the second quarter as limited job growth prompted Americans to curb spending. The nation’s gross domestic product expanded at a 1.5 percent annual pace from April to June, down from a 2 percent gain in the first quarter, Commerce Department figures showed July 27.
Amid the slowdown, earnings also moderated. Corporate profits dropped 2.7 percent in the first quarter from the prior three months, the first decrease in a year, Commerce Department data show.
“We believe there is more emphasis on productivity and cost reduction in a slowing economy than there obviously is in capacity expansion,” Keith Nosbusch, chairman and chief executive officer of Rockwell Automation Inc., which makes factory automation software, said during a July 25 earnings call. “We’ve been very successful in both the U.S. and Western Europe, two mature markets that require ongoing cost reductions, ongoing productivity improvements.”
Focusing on efficiency may, in turn, make businesses more reluctant to take on new employees after hiring jumped at the beginning of 2012. Payrolls increased by 677,000 workers from January through March. They grew by less than half as much in the second quarter, expanding by 219,000 employees.