WASHINGTON — U.S. nonfarm productivity unexpectedly fell 0.9% in the second quarter to post its first decline in six quarters, the Labor Department reported Tuesday.
Unit labor costs rose 0.2% for the three month-period ending June 30 for the first time this year as hourly compensation fell.
Economists expected productivity to increase 0.2% and unit labor costs to rise 1.5%, according to the median estimate from Thomson Reuters.
“The strong productivity gains of the past year and a half were the result of U.S. companies reducing their work force and working their remaining employees harder,” said Nariman Behravesh, the chief economist at IHS Global Insight. “This process has come to an end.”
Behravesh predicted companies will now begin adding workers to make up for their inability to expand productivity at the same rate.
Productivity for the first quarter, which ended March 31, was revised higher to a 3.9% increase from the previously reported 2.8% gain.
Unit labor costs fell 3.7% in the first quarter, revised from the 1.3% decrease reported in June.