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Economy in Brief

U.S. Labor Productivity Improves Further, Lowering Costs
by Tom Moeller   February 3, 2011

Labor productivity in the nonfarm business sector rose 2.6% (AR) and roughly repeated its Q3 increase. The rise exceeded Consensus expectations for a 2.0% increase. Nevertheless, y/y growth decelerated to 1.7% following its upward surge following the recession. For the full year, productivity rose 3.6% and roughly repeated the 2009 increase. Last quarter's rise in productivity reflected a 4.5% quarterly gain (3.7% y/y) in output which was improved from the 3.8% Q3 rise. The gain in hours held roughly steady at 1.8% (2.0% y/y).

As the improvement in productivity outpaced a 1.9% gain in compensation, after two quarters of strength, unit labor costs ticked down 0.6%; a 0.3% increase had been expected. The decline from last year amounted to 0.2%. For the full year costs fell 1.5%, roughly the same as in 2009. 

The factory sector's productivity rose 5.8% after a 1.4% Q3 rise. Real output gained 3.7% (6.4% y/y) while hours worked fell 2.0% (+2.7% y/y). The productivity gain lowered unit labor costs by 2.9% and by 3.0% y/y as compensation rose 2.8% (0.5% y/y).

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

Productivity & Costs (SAAR,%) Q4'10 Q3'10 Q2'10 Q4 Y/Y 2010 2009 2008
Nonfarm Business Sector
  Output per Hour (Productivity) 2.6 2.4 -1.8 1.7 3.6 3.5 1.0
  Compensation per Hour 1.9 2.3 2.9 3.5 2.0 1.9 3.3
  Unit Labor Costs -0.6 -0.1 4.9 -0.2 -1.5 -1.6 2.2
Manufacturing Sector
  Output per Hour 5.8 1.4 5.7 3.6 6.0 2.0 -0.3
  Compensation per Hour 2.8 1.5 4.8 0.5 1.2 5.2 4.0
  Unit Labor Costs -2.9 0.1 -0.8 -3.0 -4.5 3.1 4.3
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