Productivity Gains Add To Case for Rate Cuts [Video]

Workers were more efficient in the second quarter, potentially allowing space for wages to continue growing without putting too much upward pressure on inflation.

Labor productivity increased 2.3% in the 2024 second quarter from the prior quarter, Bureau of Labor Statistics data showed, better than the 0.4% increase in the first quarter. Economists surveyed by The Wall Street Journal and Dow Jones Newswires had forecast a more modest increase of 1.8%.

“The firming in productivity growth is notable because it has scope to improve the economy’s potential rate of growth,” wrote Wells Fargo economists Sarah House, Michael Pugliese, and Nicole Cervi.

Labor productivity measures economic output against the number of hours worked. If labor productivity is growing, it usually leads to increased economic growth, since more is produced over the same amount of time.

Productivity measurements are only now getting back in order after pandemic-era hiring trends helped skew the index. The mass layoffs at the onset …