Comment on Productivity and Costs

Bart van Ark, Executive Vice President and Chief Economist, The Conference Board

Q1 Productivity: MODEST REBOUND, STILL FAR BELOW THE LONG TERM AVERAGE

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May 02, 2013, 09:09 ET

NEW YORK, May 2, 2013 /PRNewswire/ -- The U.S. Bureau of Labor Statistics today reported 0.7 percent annualized growth in labor productivity for the first quarter of 2013.

After a decline of 1.7 percent (annualized) in the fourth quarter of 2012, this modest rebound in labor productivity is still well below the longer term trend of 2-2.5 percent. This small productivity dividend will do little to keep stock prices near their current highs or positively impact profit outlooks. It also does not provide much incentive to businesses and investors to green light some new investment projects. Those are critical ingredients in sustaining output growth down the road. The small improvement in productivity goes together with a moderate improvement in total hours worked, suggesting that productivity will not have a significant impact on the labor market any time soon.

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