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Economy in Brief

1Q U.S. Productivity Revised Up
by Tom Moeller June 1, 2006

Non-farm labor productivity growth during 1Q '06 was revised up to 3.7% from the 3.2% reported last month. The updated figure fell short of Consensus expectations for a revision to 4.0%.

Faster growth in output accounted for the revision and it is now estimated to have risen 6.5% (4.2% y/y) versus the earlier estimate of 5.8% growth. The estimate of hours worked was little changed at 2.7% (1.7% y/y).

Unit labor cost growth was revised down sharply to 1.6% reflecting the upward revision to productivity as well as a downward revision to compensation growth to 5.3%. Cost pressure in 4Q '05 also was revised down sharply due to a revised decline in compensation.

Factory sector productivity growth was slightly slower than initially estimated at 3.8% (4.0% y/y) versus the initial estimate of 4.2%. As a result of an upward revision to compensation growth to 1.9% (2.1% y/y) from 1.5%, unit labor costs in the factory sector only declined 1.9% (-1.8% y/y) instead of the initial estimate of a 2.6% drop.

A Leaner, More Skilled U.S. Manufacturing Workforce from the Federal Reserve Bank of New York is available here.

This first estimate of nonfinancial corporate sector productivity indicated a 3.7% (3.7% y/y) gain after 2.4% growth during 4Q. Unit labor costs rose 1.3% q/q but since the moderate rise followed a 3.2% 4Q decline, costs remained down 0.8% from the year earlier level.

Non-farm Business Sector (SAAR) 1Q' 06 (Revised 1Q '06 4Q '05 Y/Y 2005 2004 2003
Output per Hour 3.7% 3.2% -0.3% 2.5% 2.7% 3.4% 3.9%
Compensation per Hour 5.3% 5.7% -0.9% 2.8% 5.1% 4.6% 4.0%
Unit Labor Costs 1.6% 2.5% -0.6% 0.3% 2.3% 1.1% 0.0%
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