Bad Signs for U.S. Economy
U.S. labor productivity fell for the second straight quarter this spring while labor costs climbed, a bad sign for Federal Reserve officials trying to get inflation back under control. U.S. non-farm labor productivity — a measure of goods and services produced per hour worked — fell at a seasonally adjusted annual rate of 4.6% in the second quarter from the prior quarter, the Labor Department said Tuesday.
Unit labor costs, a measure of worker compensation and productivity, increased at a 10.8% pace in the second quarter from the prior quarter. The quarterly figures are volatile, but the latest numbers follow a 7.4% productivity pullback in the first quarter, the sharpest drop in 74 years.
“The Fed simply can’t get to 2% inflation with this sort of productivity and wage growth,” said Wells Fargo economist Sarah House. Meanwhile, Bank of America thinks the U.S. yield curve could invert more deeply than at any time since the 1980s because of the Fed’s efforts to cool inflation. The two-year Treasury rate currently exceeds the 10-year by almost 50 basis points. The inversion, around the deepest since 2000, is viewed as a sign of a looming recession.
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