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Economy in Brief

2Q U.S. Productivity Revised Down
by Tom Moeller September 7, 2005

Non-farm labor productivity last quarter was revised down to 1.8% from 2.2%. Consensus expectations had been for 2.1% growth. Growth in output was lowered to 4.1% from 4.4% reported initially while hours worked were raised to 2.2% from 2.1%.

Unit labor cost growth was revised sharply higher to 2.5% from 1.3% reflecting the reduction in productivity, but compensation costs were raised even more to 4.4% from 3.5%.

Factory sector productivity growth was similarly reduced to 3.6% (4.6% y/y) from 4.1% due to a lowered estimate of output.An upward revision to manufacturing compensation growth to 8.4% from 6.6% raised unit Labor costs sharply to 4.7% (4.3% y/y) from 2.3%.

Reported for the first time, nonfinancial corporate sector productivity surged 6.8% (6.3% y/y) and the spike lowered unit labor costs by 2.6% (+0.3% y/y). Output rose 9.5% (8.0% y/y). This measure is gleaned from the income side of the National Income & Product Accounts (NIPA) as opposed to the non-farm and manufacturing figures which are derived from the output side.

Analysis of the Economic & Budgetary Effects of Hurricane Katrina from the US Congressional Budget Office can be found here.

Non-farm Business Sector (SAAR) 2Q '05 (Revised) 2Q '05 (Prelim.) 1Q '05 Y/Y 2004 2003 2002
Output per Hour 1.8% 2.2% 3.2% 2.2% 3.4% 3.8% 4.0%
Compensation 4.4% 3.5% 5.5% 6.5% 4.5% 4.0% 3.5%
Unit Labor Costs 2.5% 1.3% 2.2% 4.2% 1.1% 0.2% -0.5%
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