The Labor Department reported that US labor productivity rose in the three months prior to June, despite signs of continuing economic downturn. The increase in productivity was unexpected; normally productivity is reduced during economic downturns as companies’ reduction of their workforce lags behind their output. The rise in productivity is a sign that companies were quick to layoff workers as the economic downturn deepened. The increasingly weak manufacturing sector is expected to contribute to another drop in the short-term interest rate when the Federal Reserve meets on August 21.
See Gerard Baker and Mary Chung, Financial Times, August 7, 2001