Fellow hamsters, if it felt
like you were running faster or maybe smarter on the old exercise wheel in your
cage last quarter, you were, according to the U.S. Bureau of Labor Statistics. The question is how many hamsters survived to
enjoy the workout.
The BLS reported Thursday that
nonfarm business sector labor productivity increased a seasonally
adjusted annualized 2.4 percent in the second quarter of 2025, as output
increased 3.7 percent and hours worked increased 1.3 percent. That was up from a revised productivity decrease
of 1.8 percent in the first quarter.
And the average hamster was
getting somewhere, too. Adjusted for consumer prices, real hourly compensation
increased an annualized 2.3 percent in the second quarter. Real compensation was up 1.4 percent over the
last four quarters through 2Q25.
Meanwhile, unit labor
costs, that is, the ratio of hourly compensation to productivity growth rates,
increased an annualized 1.6 percent in the second quarter, a slowdown from the
four quarters rate of 2.6 percent, good news for businesses that will have to
deal with higher costs from other inputs due to Trump’s tariffs.
Now, productivity growth is
hailed as key to how the working stiff like your correspondent and his fellow
hamsters get ahead of the game in this vale of tears. But the problem, as we see it, is that
productivity gains from fewer hamsters would be a recipe for social unease and
a reason to keep the cork in the champagne.
The sharp downward revisions to May and June payrolls reported last week
point to a disconnect in the relationship between rising productivity and a
tide lifting all boats.
We think the second quarter
productivity and payroll numbers could reflect the first ripple of the
artificial intelligence revolution that is about to reinvent work and likely
replace a lot of us.
Also on the labor front, weekly
initial jobless claims increased 7,000 to a seasonally adjusted 226,000, the
highest in a month. More telling,
perhaps, was news that continuing claims rose 38,000 to 1.974 million, the
highest since November 2021, an indication that finding a new hamster cage is
getting tougher.
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