By Shobhana Chandra
Aug. 8 (Bloomberg) -- Worker productivity in the U.S. probably grew in the second quarter as employers cut jobs to weather the jump in raw-material expenses, economists said before a government report today.
Efficiency, a measure of how much an employee produces for each hour of work, rose at an annual 2.5 percent pace after a 2.6 percent gain in the first quarter, according to the median estimate of 67 economists in a Bloomberg News survey. Labor costs likely slowed.
Employers eliminated 165,000 jobs from April through June to shore up profits, and still managed to get more output with fewer workers. Gains in productivity help lower inflation and bolster the Federal Reserve's forecast that prices will moderate.
``Productivity has been a true bright spot for the economy,'' said Joseph Brusuelas, chief economist at Merk Investments LLC in Palo Alto, California. ``This should mitigate the upside risks to inflation.''
The Labor Department's figures are due at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from gains of 0.7 percent to 3.6 percent.
Labor expenses adjusted for the gain in efficiency probably rose at a 1.4 percent rate after climbing 2.2 percent from January through March, according to the survey median.
Still Cutting
Employers remained focused on maintaining productivity at the start of the second half of the year. Payrolls fell in July for a seventh straight month and the number of hours worked dropped. Americans labored an average 33 hours and 36 minutes per week, six minutes less than in June and matching the shortest workweek since records began in 1964, government figures showed.
YRC Worldwide Inc., the biggest U.S. trucking company by sales, reported a second-quarter profit that ended two quarters of losses as it shut terminals, cut jobs and changed management at some regional brands.
``Our actions to improve operational efficiency, get our regional companies back on track and reduce overhead costs have been effective,'' Chief Executive Officer Bill Zollars said in a statement on July 24. ``Further operational improvements'' are planned for this quarter.
Today's report may ease concern that the productivity surge that began in 1996 was waning. Efficiency rose an average 1.5 percent per year from 2005 to 2007, down from 2.9 percent in the nine years ended in 2004.
The increases over the last three years may have been even smaller. Commerce Department revisions issued on July 31 showed the economy expanded less than previously estimated since 2005, signaling productivity may also have been lower. Today's Labor Department report will reflect those changes.
Greenspan, Productivity
In the 1990s, former Fed Chairman Alan Greenspan was one of the first to recognize productivity was accelerating because of the increased use of computers and the Internet, and that the improvement would contain inflation even as the economy gained strength and unemployment stayed low. The realization allowed the Fed to keep interest rates little changed from 1996 to 1999.
The risks of softening growth and rising inflation led central bankers to keep the benchmark rate unchanged at 2 percent this week.
``Although downside risks to growth remain, the upside risks to inflation are also of significant concern,'' Fed officials said Aug. 5 in a statement. ``The committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain.''
Bloomberg Survey
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Prod- Labor
uctivity Costs
QOQ% QOQ%
=============================================
Date of Release 08/08 08/08
Observation Period 1Q 1Q P
---------------------------------------------
Median 2.5% 1.4%
Average 2.5% 1.4%
High Forecast 3.6% 2.7%
Low Forecast 0.7% -1.2%
Number of Participants 67 63
Previous 2.6% 2.2%
---------------------------------------------
4CAST Ltd. 3.6% 0.4%
Action Economics 1.8% 2.7%
AIG Investments 3.0% 1.0%
Argus Research Corp. 2.2% 1.7%
Banc of America Securitie 2.5% 1.6%
Banesto 2.5% ---
Bank of Tokyo- Mitsubishi 3.0% 1.6%
Bantleon Bank AG 2.2% 1.5%
Barclays Capital 3.0% 1.4%
BBVA 1.2% ---
BMO Capital Markets 2.5% 0.5%
BNP Paribas 2.8% 0.9%
Briefing.com 2.5% ---
Calyon 2.6% 1.3%
CFC Group 2.7% 1.2%
CIBC World Markets 2.0% ---
Citi 1.8% 0.9%
ClearView Economics 2.7% 2.3%
Commerzbank AG 2.8% 1.1%
Credit Suisse 2.7% 1.5%
Daiwa Securities America 2.2% 1.5%
Danske Bank --- 1.4%
DekaBank 3.0% 0.8%
Deutsche Bank Securities 2.5% 1.5%
Dresdner Kleinwort 2.1% 2.2%
DZ Bank 2.5% 1.0%
First Trust Advisors 2.4% -1.2%
Fortis 2.3% ---
FTN Financial 2.8% 2.5%
Global Insight Inc. 1.8% 1.2%
Goldman, Sachs & Co. 3.5% 2.5%
H&R Block Financial Advis 2.4% 1.0%
Helaba 3.5% 1.5%
High Frequency Economics 2.2% 0.7%
HSBC Markets 2.4% 1.6%
IDEAglobal 2.5% 1.6%
Informa Global Markets 2.4% 1.5%
ING Financial Markets 2.2% 1.3%
Insight Economics 3.0% 1.0%
J.P. Morgan Chase 2.1% 1.7%
Janney Montgomery Scott L 2.4% 1.3%
JPMorgan Private Client 2.7% 1.1%
Landesbank BW 2.6% 1.2%
Lehman Brothers 1.5% 1.5%
Lloyds TSB 2.5% 2.1%
Merk Investments 2.6% 1.2%
Merrill Lynch 2.2% 1.2%
MFC Global Investment Man 2.5% 1.4%
Moody's Economy.com 2.8% 1.5%
Morgan Stanley & Co. 2.8% 1.0%
National City Corporation 2.4% 1.4%
Natixis 0.7% 1.3%
Nomura Securities Intl. 2.7% 1.2%
Nord/LB 3.5% 2.0%
PNC Bank 2.4% 2.0%
RBS Greenwich Capital 3.0% 0.5%
Ried, Thunberg & Co. 1.7% 1.3%
Scotia Capital 2.3% 0.9%
Societe Generale 2.8% 2.1%
Thomson Financial/IFR 3.0% 1.6%
UBS Securities LLC 2.4% 1.4%
Unicredit MIB 2.4% 1.4%
University of Maryland 2.7% 1.7%
Wachovia Corp. 2.5% 1.3%
Wells Fargo & Co. 1.8% 2.7%
WestLB AG 2.6% 1.2%
Westpac Banking Co. 3.0% 1.5%
Wrightson Associates 1.7% 1.3%
=============================================
To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
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