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Productivity falls for first time since 2008

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Worker productivity dropped this spring for the first time in more than a year, a sign that companies may need to step up hiring if they hope to grow.

Productivity declined at an annual rate of 0.9 percent in the April-to-June quarter after posting large gains throughout 2009, the Labor Department said Tuesday. Unit labor costs edged up 0.2 percent in the second quarter, the first increase since the spring of 2009.

Employee output rose by large amounts during the recession. Companies slashed their payrolls and pushed unemployment up to the highest levels in more than two decades. Economists said a slowing in productivity would be a welcome development if it translates into more hiring.

"Economists often tout the long-run benefits of strong productivity growth, but given the precarious state of the economy, a little more employment, even at the expense of productivity, would likely be helpful in the near term," said Sal Guatieri, senior economist at BMO Capital Markets.

Stock futures fell ahead of the report's release as investors remained cautious while the Federal Reserve met to discuss the slowing recovery and possible stimulus measures.

Productivity for all of 2009 rose 3.5 percent, the best showing in six years and a reflection of companies' ability to produce more with fewer workers.

Output of U.S. workers is the key ingredient to boosting living standards. It allows companies to pay workers more because of the increased production without being forced to raise the cost of their goods, which sparks inflation.

Still, economists contend that the big productivity gains of recent quarters are actually harming the economy's prospects for a sustainable rebound.

They believe companies need to stop slashing their work forces and start rehiring laid off workers. That will boost incomes and give households the support they need to increase consumer spending, which accounts for 70 percent of economic activity.

A slowing in productivity and a rise in unit labor costs will not raise worries about inflation in the current environment because inflation pressures at the moment are nonexistent.

In fact, some analysts believe the bigger threat is the possibility of deflation, a destabilizing bout of falling prices and wages.

The 0.9-percent drop in productivity in the second quarter was the first decline since a 0.1-percent dip in the fourth quarter of 2008. It was the biggest fall since a 1.3- percent decrease in the third quarter of 2008.

The 0.2-percent rise in unit labor costs followed a 3.7-percent plunge in labor costs in the first quarter. It was the first increase since a 0.6-percent rise in the second quarter of last year.

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  1. So much for Eric Holder's conversation about race. If white people have got something to say, they get sued over it. Bottom line: white people have un-freer speech than others as a consequence of the misnamed "Civil rights laws."

  2. I agree, having seen three shows, that I was less than wowed. Disappointing!!

  3. Start drilling, start fracking, and start using our own energy. Other states have enriched their citizens and nearly elminated unemployment by using these resources that are on private land. If you are against the 'low prices' of discount stores, the best way to allow shoppers more choice is to empower them with better earnings. NOT through manipulated gov mandated min wage hikes, but better jobs and higher competitive pay. This would be direct result of using our own energy resources, yet Obama knows that Americans who arent dependent of gov welfare are much less likely to vote Dem, so he looks for ways to ensure America's decline and keep its citizens dependent of gov.

  4. Say It Loud, I'm Black and Ashamed: It's too bad that with certain "black" entertainment events, it seems violence and thuggery follows and the collateral damage that it leaves behinds continues to be a strain on the city in terms of people getting hurt, killed or becoming victims of crimes and/or stretching city resources. I remember shopping in the Meadows area years ago until violence and crime ended make most of the business pack you and leave as did with Lafayette Square and Washington Square. Over the past 10 to 12 years, I remember going to the Indiana Black Expo Soul Picnic in Washington Park. Violence, gang fights and homicides ended that. My great grandmother still bears the scares on her leg from when she was trampled by a group of thugs running from gun fire from a rival gang. With hundreds of police offices downtown still multiple shootings, people getting shot downtown during Black Expo. A number of people getting shots or murdered at black clubs around the city like Club Six on the west side, The Industry downtown, Jamal Tinsley's shot out in front of the Conrad, multiple fights and shootings at the skating rinks, shootings at Circle Center Mall and shooting and robberies and car jackings at Lafayette Mall. Shootings and gang violence and the State Fair. I can go on and on and on. Now Broad Ripple. (Shaking head side to side) Say It Loud, I'm Black and I'm Ashamed.

  5. Ballard Administration. Too funny. This is the least fiscally responsive administration I have ever seen. One thing this article failed to mention, is that the Hoosier State line delivers rail cars to the Amtrak Beech Grove maintenance facility for refurbishment. That's an economic development issue. And the jobs there are high-paying. That alone is worth the City's investment.

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