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Economy in Brief

U.S. Labor Productivity Falls And Drives Up Costs
by Tom Moeller  May 3, 2012

Last quarter, labor productivity posted an outright decline of 0.5% (AR) after having weakened considerably during all of last year. The Q1 figure matched expectations. The decline followed last year's notable deterioration in growth to just 0.6%, its weakest since 2008. Accompanying the slowdown was meaningful growth in compensation. Last quarter's 1.5% rise followed 2.5% growth in 2011 and 1.9% in 2010. Together, weaker productivity and firm compensation caused unit labor costs to advance at an elevated 2.0% annual rate, about the same as it did last year.

Factory sector productivity continued to show the payoff from investment in new technologies. Last quarter's 5.9% growth was a rebound from 0.6% in Q4'11 and pulled y/y growth back to its firm 2011 average. At the same time, growth in compensation last quarter remained a moderate 1.5%. As a result, unit labor costs fell at a 4.2% rate, the swiftest decline in two years.

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

Productivity & Costs (SAAR,%) Q1'12 Q4'11 Q3'11 Q1 Y/Y 2011 2010 2009
Nonfarm Business Sector
Output per Hour (Productivity) -0.5 1.2 1.8 0.5 0.6 4.0 2.4
Compensation per Hour 1.5 3.9 5.7 2.6 2.5 1.9 1.7
Unit Labor Costs 2.0 2.7 3.9 2.1 1.9 -2.0 -0.7
Manufacturing Sector
Output per Hour 5.9 0.6 5.5 2.5 2.5 6.6 0.6
Compensation per Hour 1.5 1.9 3.2 1.1 1.8 1.5 4.5
Unit Labor Costs -4.2 1.3 -2.2 -1.3 -0.7 -4.7 3.9
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