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US second-quarter labour costs revised sharply higher

Thursday, September 1, 2016 - 23:04

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US labour costs grew much faster than initially thought in the second quarter while worker productivity slumped, which could pressure corporate profits and business spending.

[WASHINGTON] US labour costs grew much faster than initially thought in the second quarter while worker productivity slumped, which could pressure corporate profits and business spending.

The labour Department said on Thursday that unit labour costs, the price of labour per single unit of output, increased at a 4.3 per cent annual rate as opposed to the 2.0 per cent pace reported last month. Economists polled by Reuters had expected that unit labour costs would be revised up to a 2.1 per cent rate.

Hourly compensation per hour jumped at a 3.7 per cent rate in the second quarter instead of the previously reported 1.5 per cent pace. The combination of weaker productivity and rising labour costs hurts corporate profits and could also fan inflationary pressures.

Unit labour costs rose 2.6 per cent from a year ago.

Productivity, which measures hourly output per worker, dropped at a 0.6 per cent annual rate instead of the 0.5 per cent pace of decline reported last month. It was the third consecutive quarterly drop. Productivity fell at a 0.6 per cent rate in the first quarter.

Compared to the second quarter of 2015, productivity fell at an unrevised 0.4 per cent rate, the fastest pace of decline in three years. Output per worker in the second quarter increased at a revised 1.1 per cent rate instead of the 1.2 per cent pace reported last month.

The government reported last month that gross domestic product rose at a 1.1 per cent annual rate in the second quarter following a 0.8 per cent rise in the first quarter.

REUTERS

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