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Economy in Brief

U.S. Worker Productivity Decline Is Little Revised; Factory Sector Much Stronger
by Tom Moeller  March 7, 2013

Nonfarm business sector productivity for Q4'12 declined 1.9% (SAAR, +0.6% y/y). That was hardly revised from the preliminary report of a 2.0% drop  so it helped drive up costs. For the year productivity grew 0.7%, the same as in 2011. Lower productivity growth last quarter was accompanied by a quickened 2.6% rise (2.6% y/y) in compensation per hour. Nevertheless, for all of last year compensation growth slowed to 1.4%, its weakest since 2009. This combination of lower productivity and higher compensation caused unit labor costs to jump at a 4.6% annual rate (2.1% y/y) in Q4'12. Declines during the prior two quarters, however, left the full year increase at a modest 0.7%.

The productivity picture was more encouraging in the factory sector. The 2.1% gain (1.8% y/y) was revised from 0.5% in the preliminary report. Nevertheless, the 2.2% full year increase remained down from 2.6% in 2011 and 6.5% in 2010. Compensation growth decelerated slightly more than reported earlier to 0.2% (4.2% y/y) but the four quarter increase remained firm at 4.2%, its fastest since Q3'09. The full year 2.2% rise followed a 2.8% gain in 2011, both of which were slower than the 8.0% increase in 2003. The improvement in productivity lowered factory sector unit labor costs by 1.9% last quarter. As a result, unit labor costs were unchanged for the whole year, as they were in 2011.

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

Productivity & Costs (SAAR,%) Q4'12 Q3'12 Q2'12 Q4 Y/Y 2012 2011 2010
Nonfarm Business Sector
Output per Hour (Productivity) -1.9 3.1 1.7 0.5 0.7 0.6 3.1
Compensation per Hour 2.6 1.2 1.2 2.6 1.4 2.6 2.1
Unit Labor Costs 4.6 -1.9 -0.5 2.1 0.7 2.0 -1.0
Manufacturing Sector
Output per Hour 2.1 -0.9 0.1 1.8 2.2 2.6 6.5
Compensation per Hour 0.2 0.6 9.1 4.2 2.2 2.8 1.2
Unit Labor Costs -1.9 1.4 9.0 2.3 0.0 0.1 -5.0
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