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Economy in Brief

Decline in 4Q U.S. Productivity Little Revised
by Tom Moeller March 7, 2006

For 4Q '05, the decline in non-farm labor productivity was little revised at -0.5% versus the initial estimate of a 0.6% fall. It was the first decline in output per hour since 1Q '01 and followed an average gain of 3.7% during the prior ten quarters. Consensus expectations had been for a slight upward revision to a 0.1% decline.

The initially reported slowdown in output growth which lowered productivity was moderated somewhat to 1.5% (3.7% y/y) from 4.7% during 3Q but hours worked rose slightly faster than initially estimated; 2.0% (1.2% y/y) versus a 0.4% 3Q rise.

Growth in compensation costs was unrevised at 2.8% but the 5.5% rise during 3Q was upwardly revised. Unit labor cost growth of 3.3% was the quickest in a year though y/y growth of 1.3% represented an easing of cost pressures.

Factory sector productivity growth was revised upward to 4.7% (4.3% y/y) from 3.9% following a 3.7% gain during 3Q. Compensation growth of 1.8% (4.5% y/y) was little revised and unit labor costs in the factory sector fell 2.8% (0.2% y/y).

The implicit price deflator for the nonfarm business sector was revised slightly higher to 3.4% (3.1% y/y) from 3.2%.

Stop Paying More for Less: Ways to Boost Productivity in Higher Education from the Federal Reserve Bank of St. Louis can be found here.

Non-farm Business Sector (SAAR) 4Q '05 (Revised) 4Q '05 (Prelim.) 3Q '05 Y/Y 2005 2004 2003
Output per Hour -0.5% -0.6% 4.5% 2.5% 2.7% 3.4% 3.9%
Compensation per Hour 2.8% 2.8% 5.5% 3.8% 5.4% 4.5% 4.0%
Unit Labor Costs 3.3% 3.5% 1.2% 1.3% 2.6% 1.1% 0.0%
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