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US Productivity Rose 6.8 Percent in Second Quarter

The U.S. economy has posted strong productivity gains, a boon to corporate profit margins but less than encouraging news for Americans looking for work.

The Labor Department reports productivity rose at an annual rate of 6.8 percent in the second quarter of this year, more than triple the rate registered in the first quarter and far ahead of many economists' expectations.

Productivity is defined as the amount of goods or services an worker generates in an hour. Gains in productivity allow companies to boost output while constraining labor costs, getting more with less.

In this case, production rose at an annual rate of more than 4 percent, while, on average, American businesses cut the number of hours worked by more than 2 percent. Laborers were paid more for the hours they did work, however, as wages rose at a 3.2 percent rate for the second quarter.

Productivity gains allow companies to raise their employees' wages and salaries without eroding profit margins or hiking prices of goods and services. Such gains are associated with higher living standards for the workforce, lowered inflationary pressures, improved competitiveness for U.S. products and, in the long-term, a more robust U.S. economy.

Gains in productivity are not, however, associated with short-term improvements in the job market. While releasing productivity figures, the Labor Department also reported that new applications for jobless benefits jumped by 15,000 to a total of 413,000 for the workweek ending August 30th, the highest level in nearly two months.

Economists generally view jobless claims above the 400,000 level as a sign of a weak labor market.