U.S. worker productivity fell for the third straight quarter in the spring this year, suggesting that corporate profits may continue to decline and wage growth may remain sluggish.
The Labor Department said on Tuesday that productivity, which measures hourly output per worker, dropped at a 0.5 percent annual rate in the April-June period, extending the longest decline since 1979. Productivity fell at an unrevised 0.6 percent rate in the first quarter.
In the second quarter, productivity decreased at a 0.4 percent rate compared to the same period last year, the fastest year-on-year pace of decline in three years.
Revisions to data going back to 2013 also confirmed the softening productivity trend, but strong employment gains have helped to raise output overall with U.S. payrolls growing by more than 500,000 jobs in June and July.
"The reason the economy has still been able to expand is because of labor input. Firms are hiring people at a reasonably healthy rate," said Joseph LaVorgna, chief economist at Deutsche Bank Securities in New York.
"However, we do not believe this can last, because strong hiring in the face of weak productivity necessarily implies a further deterioration in corporate profit margins."
After rising rapidly in the 1990s as computers made workers more efficient, productivity has fallen as companies have been reluctant to invest in new equipment in the past 18 months given the outlook for sluggish economic growth globally.
Oil prices fell 1 percent on Tuesday, extending losses in post-settlement trade after preliminary data showed a surprise U.S. crude stockpile build last week, heightening worries about a global petroleum glut.
The market also lost the previous day's upward momentum as speculation fizzled that the Organization of the Petroleum Exporting Countries and other oil producers would embark on another round of talks on price cooperation after their failed effort in April.
Trade group American Petroleum Institute (API) reported U.S. crude stockpiles rose by 2.1 million barrels during the week to Aug. 5. Analysts polled by Reuters had expected a 1 million-barrel drawdown instead.
The U.S. Energy Information Administration will issue official inventory data on Wednesday (EIA).
In separate data issued on Tuesday, EIA said it expected a smaller decline of 700,000 barrels per day (bpd) in U.S. crude oil production in 2016 than the 820,000-bpd drop it forecast a month ago. It said an uptick in drilling will lead to more output later this year.
Reference: Reuters
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