WASHINGTON (MarketWatch) — The productivity of American companies and their employees wasn’t as bad in the first quarter as originally reported.
The government on Monday said productivity was unchanged in the first three months of 2017 instead of declining at a 0.6% annual rate.
The biggest change: The increase in output, or how many goods and services companies produce, was raised to 1.7% from 1%.
The amount of hours employees worked, meanwhile, was revised to a slightly higher 1.7% gain instead of 1.6%.
The updated figures show that labor costs rose more slowly than initially reported, a sign companies continue to keep costs down despite a steadily expanding economy and growing shortages of skilled labor.
Unit-labor costs rose a revised 2.2% vs. the prior 3% reading. Over the past year unit-labor costs have advanced 1.1%, well below the historic 2.8% average since the end of World War Two.
The closely follow measure reflects how much it costs a business to produce one unit of output, such as a ton of coal, a ream of paper or a bushel of wheat.
Hourly compensation — pay and benefits — rose a revised 2.2% in the first quarter, but after adjusting for inflation workers actually lost ground. Real compensation fell 0.9%.
The upward revision in the first quarter doesn’t change the underlying weakness in productivity, the key to a higher standard of living.
Productivity rises when workers supply more goods and services in the same amount of time. Since an economic recovery began eight years ago, productivity has been increasing at 1.2% annual clip. That’s well below the 2.1% average since from 1947 to 2016 or the 2.6% average from 2000 to 2007.
The slowdown in productivity helps explain slower increases in worker pay and a stagnant standard of living, among other things.
There’s been much debate about why productivity is weak and how it can be raised, but little consensus on what can be done aside from somehow encouraging businesses to invest more.
All figures reflect seasonally adjusted annual rates.
In premarket trading, futures markets pointed to a a lower opening for the Dow Jones Industrial Average
- Saudi Arabia, Bahrain, UAE sever diplomatic relations with Qatar
- Top Democrat says there’s smoke, but ‘no smoking gun’ yet in Russia probe
- Apple downgraded as analysts say investors dazzled by iPhone 8 aren’t pricing in enough risk