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Economy in Brief

U.S. Productivity Growth Revised Little, Unit Labor Costs Revised Up
by Tom Moeller March 5, 2008

Nonfarm labor productivity growth during 4Q07 was revised little, to 1.9% growth from 1.8% reported initially. The figure still is a marked slowdown from the 3Q figure of 6.3% during 3Q07 which was revised up slightly. Consensus expectations had been for no revision to 4Q growth.

Growth in output last quarter was little changed at 0.3% and still down sharply from 5.6% during 3Q. A 1.6% decline in hours worked is what pulled productivity up and it was the sharpest q/q decline since 2001.

Compensation per hour last quarter was revised up to a 4.6% growth rate. Compensation growth for the year accelerated to a 4.9% rate of growth which was the quickest since 2000.

The upward revision to compensation raised the estimate of unit labor cost growth to 2.6% from 2.1%, and from the revised 3Q decline of 2.7%. The Consensus expectation had been for unit cost growth to be left unchanged at 2.1%. The 4Q rise was again enough to lift the gain in labor costs for the full year by 3.1%, the quickest since 2000.

Productivity in the factory sector eased to a little revised 2.3% rate of growth from 4.1% during 3Q. For all of 2007 factory sector productivity rose 3.7% versus 4.3% during 2006. Unit labor costs rose 2.1% after declines during the prior two quarters. For the full year unit labor costs in the factory sector rose 1.6% after two years of negative growth.

Condition of the U.S. Banking System is yesterday's Senate testimony by Fed Vice ChairmanDonald L. Kohn and it can be found here.

Non-farm Business Sector (SAAR, %) Q4 '07 (Revised) Q4 '07 Q3 '07 Y/Y 2007 2006 2005
Output per Hour 1.9 1.8 6.3 2.9 1.8 1.0 1.9
Compensation per Hour 4.6 3.9 3.4 3.9 4.9 3.9 4.0
Unit Labor Costs 2.6 2.1 -2.7 0.9 3.1 2.9 2.0
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