The share of U.S. economic output going to workers fell to a record low in the second quarter, even as productivity continued to rise, widening the gap between how much businesses are producing and how much employees are receiving from that growth.
The Bureau of Labor Statistics said labor’s share of nominal gross domestic product dropped to 52.9%, down from 53.7% in the first quarter and the lowest level since the government began tracking the measure in 1947.
The decline came as nonfarm productivity rose at a 1.4% annualized rate in the second quarter, more than twice what economists had expected. Output is increasingly being supported by automation, artificial intelligence and other technology investment without a matching increase in labor costs.
For businesses, the immediate benefit is greater output without the same pressure to expand payrolls.
Unit labor costs rose just 1.3% during the quarter, while hourly compensation increased 2.7%. That combination helps margins, particularly for companies already investing heavily in software, automation and AI.
The broader issue is where the productivity gains ultimately flow. When output rises faster than compensation, a larger share of the economic benefit accrues to corporate profits and owners of capital rather than employees.
That can be positive for margins and investment in the short term, but it also raises a longer-term consumer question. Household spending still depends on wages, and an economy in which productivity gains are not translating proportionately into worker income can eventually make it harder for consumption to keep pace with business output.
JBizNews Desk | Wall Street
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