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Productivity Makes Biggest Leap Since 2003. (Yes, You're Working Harder.)

Productivity grew at an annualized rate of 6.6 percent in the second quarter, the Bureau of Labor Statistics reports. That's the largest increase since the third quarter of 2003.

It's good news for workers, in the sense that people with jobs are finding themselves more fully occupied. Only when companies can profit from doing more work will they hire new people to do it. When productivity rises, it suggests that employers are coming closer to having the right size of workforce — a better base from which to grow.

Today's numbers show that actual output is falling, but that hours worked are falling faster. Compared to this time last year, output was down 5.5 percent and hours worked 7.2 percent. Labor costs — the ratio of hourly wages to productivity — fell at an annual clip of 5.9 percent. That's the biggest drop since the second quarter of 2000.

Update: After the jump, what "productivity" means.

In the simplest terms, productivity is total output divided by hours worked. That ratio gives us a picture of how much stuff we're making for the amount of time we're putting in.

The "hours worked" part is fairly straightforward. The Bureau of Labor Statistics tracks them each month as part of its regular report on the employment situation.

"Output" gets you into a whole lot of weeds involving "chained dollars" and other technical points. In essence, you can think of output as the gross domestic product, which measures the market value — in dollars — of all the nation's goods and services.

(Thanks to reader rb for the nudge.)

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