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Economy in Brief

3Q U.S. Worker Productivity Strength Revised Lower & Unit Costs Up
by Tom Moeller December 3, 2009

Last quarter's strength in productivity growth was revised lower with the reduced reading on GDP. Nevertheless, the revised 8.1% jump remained the strongest since 3Q '03 and fell just short of Consensus expectations for an 8.5% increase.">

The revision reflected a downwardly revised 2.9% (-3.7% y/y) increase in output. Hours-worked (employment times hours) was little-revised at down 4.8% (-7.4% y/y) which followed a 7.5% 2Q drop.Compensation costs, however, were revised up significantly to a 5.4% quarterly rate of growth and by 2.5% y/y.

The downward revision of productivity and the upward revision to compensation lessened the previously reported decline in unit labor costs. Nevertheless, the 2.5% decline remained the third consecutive quarterly fall but it eased the y/y change to -1.4%.

The surge in 3Q worker productivity growth in the factory sector was revised little at a 13.4% (AR) increase. That was a record and it lifted y/y growth to 3.0%, the highest since early-last year. The increase came as output rose at an 8.4% rate (-10.7% y/y) and hours worked fell at a 4.4% rate (-13.3% y/y). Compensation rose at an upwardly revised 6.5% rate (6.1% y/y), therefore unit labor costs in the factory sector fell at a lessened 6.1% annual rate (+3.0% y/y).

The productivity & cost figures are available in Haver's USECON database.

Fed Chairman Ben S. Bernanke's Senate testimony today can be found here.

Nonfarm Business Sector (SAAR,%) 3Q '09 (Revised) 3Q '09 (Prelim.) 2Q '09 1Q '08 Y/Y 2008 2007 2006
  Output per Hour 8.1 9.5 6.9 0.3 4.0 1.8 1.9 0.9
  Compensation per Hour 5.4 3.8 6.9 -4.7 2.5 2.8 4.2 3.8
  Unit Labor Costs -2.5 -5.2 -0.0 -5.0 -1.4 1.0 2.3 2.8
Manufacturing Sector
  Output per Hour 13.4 13.6 6.8 -2.5 3.0 0.8 3.2 1.0
  Compensation per Hour 6.5 5.5 6.5 -0.4 6.1 3.0 4.3 2.0
  Unit Labor Costs -6.1 -7.1 -0.3 2.2 3.0 2.2 1.1 0.9
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