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Economy in Brief

U.S. Unit Labor Costs Rise Again
by Tom Moeller  August 8, 2012

No wonder growth in corporate profitability has slowed. The cost of labor has been on the rise as growth in labor compensation outpaces productivity. Unit labor costs grew 1.7% last quarter following a 5.6% Q1 rise. These gains follow last year's 2.0% increase and outright declines during both 2010 and 2009.Productivity did post a 1.6% increase last quarter, but that followed just 1.1% growth during the prior four quarters. In 2010 and 2009, growth was three times the recent rate. Compensation grew at a 3.3% rate last quarter following a 5.5% Q1 advance. That left y/y growth at 1.9% versus the accelerated gains of 2.7% last year and 2.0% in 2010.(Data back to 2009 were revised reflecting last week's revision to the National Income & Product Accounts. For 2011 and 2010, productivity growth was revised to 0.7% and 3.1% from 0.6% and 4.0%, respectively.)

In the factory sector, unit labor cost growth also has turned positive, albeit modestly, following a decline in 2010. Unit labor costs grew last quarter at a 0.3% rate following a modest decline in Q1. For all of last year, growth of 0.1% was little to talk about except that it followed a 5.0% decline in 2010.Growth in manufacturing productivity of 0.2% last quarter followed a 5.5% Q1 rise. That was enough to lower growth to half that in 2010. Compensation has been positive. It ticked at a 0.5% rate last quarter but that followed a 5.1% spurt in Q1. For all of last year, compensation grew 2.6% versus a negligible rise of 1.1% in 2010.

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

Productivity & Costs (SAAR,%) Q2'12 Q1'12 Q4'11 Q2 Y/Y 2011 2010 2009
Nonfarm Business Sector
Output per Hour (Productivity) 1.6 -0.5 2.8 1.1 0.7 3.1 2.9
Compensation per Hour 3.3 5.1 -0.7 1.9 2.7 2.0 1.4
Unit Labor Costs 1.7 5.6 -3.3 0.8 2.0 -1.0 -1.5
Manufacturing Sector
Output per Hour 0.2 5.5 0.7 2.9 2.5 6.4 0.1
Compensation per Hour 0.5 5.1 -6.0 -0.1 2.6 1.1 4.1
Unit Labor Costs 0.3 -0.4 -6.6 -2.9 0.1 -5.0 4.0
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