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Economy in Brief

U.S. Labor Productivity Slows
by Tom Moeller  May 5, 2011

The current economic slowdown is taking a toll on worker productivity. Labor productivity in the nonfarm business sector rose 1.6% last quarter, the slowest gain since Q2'10. Productivity is calculated by dividing an index of real output by an index of hours worked by all persons. During Q1, real output rose 3.1% (AR, 3.2% y/y), the least since Q2, while hours worked rose 1.4% (1.9% y/y).

The slowdown in productivity growth was accompanied by a pickup in compensation. The 2.6% q/q increase lifted the y/y gain to 2.5%. Together, these figures raised unit labor costs by a still-modest 1.0% which followed declines during both 2010 and 2009.

Factory sector productivity did not suffer the effects of slower growth last quarter. In fact, productivity rose an accelerated 6.3% due to a strengthened 9.7% increase in output (7.1% y/y) while hours worked rose 3.3% (2.3% y/y). As compensation costs rose at a stable 2.6% rate, unit labor costs fell 3.5%.

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

Facts on the Distributions of Earnings,Income, and Wealth in the United States: 2007 Update from the Federal Reserve Bank of Minneapolis can be found here here.

Productivity & Costs (SAAR,%) Q1'11 Q4'10 Q3'10 Q1 Y/Y 2010 2009 2008
Nonfarm Business Sector
  Output per Hour (Productivity) 1.6 2.9 2.3 1.3 3.9 3.7 1.0
  Compensation per Hour 2.6 1.9 2.5 2.5 2.3 2.0 3.3
  Unit Labor Costs 1.0 -1.0 0.1 1.2 -1.5 -1.6 2.2
Manufacturing Sector
  Output per Hour 6.3 5.1 2.1 4.7 5.8 -0.4 -0.4
  Compensation per Hour 2.6 2.7 2.5 3.2 2.0 5.6 4.0
  Unit Labor Costs -3.5 -2.3 0.3 -1.4 -3.7 6.0 4.5
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