Spring productivity down, labor costs up

WASHINGTON (AP) — Worker productivity fell this spring more quickly than previously estimated while labor costs were rising at a faster clip. Both developments could pose threats to a fragile economic recovery.

The Labor Department reported Thursday that productivity declined at an annual rate of 0.7 percent in the April-June period, a bigger drop than the 0.3 percent decline reported a month ago. Labor costs rose at an annual rate of 3.3 percent, faster than the 2.4 percent increase originally reported.

The changes reflected downward revisions made last week to overall economic growth which showed the economy’s output barely growing in the spring. Declining productivity, if it persists for a prolonged period, would represent a serious economic threat while rising labor costs would cut into corporate profits.

Economists are forecasting that productivity will slow over the next couple of years while labor costs will increase. However, they don’t see these developments as worrisome during the current period of high unemployment and weak income growth.