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Economy in Brief

U.S. Worker Productivity Rebounds; Unit Labor Costs Nudge Higher
by Tom Moeller  August 8, 2014

Nonfarm productivity increased at a 2.5% annual rate last quarter (1.2% y/y) following a 4.5% Q1 decline, revised from -1.7%. Real output growth of 5.2% (3.2% y/y), rebounding from a 2.4% Q1 drop, was accompanied by a 2.7% increase (2.0% y/y) in hours worked. Compensation per hour increased 3.1% (3.1% y/y) but when adjusted for inflation it nudged just 0.1% higher (1.0% y/y). The improvement in productivity caused unit labor costs to increase just 0.6% following an 11.8% Q1 surge, revised from 4.2%. The Q2 productivity gain outpaced expectations for a 1.5% rise in the Action Economics Forecast Survey. A 1.2% rise in unit labor costs was expected. Data revisions extended back to 1999, reflecting benchmark GDP revisions.

In the factory sector, worker productivity rose at an improved 3.6% rate (2.1% y/y), the quickest rise in a year. Output rebounded at a 7.0% rate (3.7% y/y) after a 1.5% gain, while hours worked rose 3.2% (1.5% y/y) following a 1.6% Q1 decline. Worker compensation per hour increased at a 2.2% rate (2.9% y/y), moderating from the 8.3% Q1 surge. Adjusted for price inflation, compensation declined 0.8% (+0.9% y/y) after a 6.2% increase during Q1. Unit labor costs declined 1.3% (+0.8% y/y) following a 5.0% jump.

The productivity & cost figures are available in Haver's USECON database. The expectations figure is from Action Economics and is the AS1REPNA database.

Productivity & Costs (SAAR,%) Q2'14 Q1'14 Q4'13 Q2 Y/Y 2013 2012 2011
Nonfarm Business Sector
Output per Hour (Productivity) 2.5 -4.5 3.3 1.2 0.9 1.0 0.1
Compensation per Hour 3.1 6.8 1.9 3.1 1.1 2.7 2.2
Unit Labor Costs 0.6 11.8 -1.3 1.9 0.2 1.7 2.1
Manufacturing Sector
Output per Hour (Productivity) 3.6 3.2 1.3 2.1 2.3 1.9 1.0
Compensation per Hour 2.2 8.3 0.8 2.9 0.6 1.7 1.7
Unit Labor Costs -1.3 5.0 -0.5 0.8 -1.6 -0.2 0.8
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