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Economy in Brief

U.S. Worker Productivity Remains Firm; Unit Labor Costs Rise Minimally
by Tom Moeller  November 6, 2014

Nonfarm productivity increased at a 2.0% annual rate last quarter (0.9% y/y) following a 2.9% Q2 gain, revised from 2.5%. Real output increased at a 4.4% rate (3.0% y/y) while hours worked gained 2.3% (2.1% y/y). Compensation per hour increased a steady 2.3% (3.3% y/y), but when adjusted for inflation it improved 1.2% (1.4% y/y). The improvement in productivity caused unit labor costs to increase just 0.3% in Q3 (2.4% y/y) following a 0.5% decline. The Q3 productivity gain outpaced expectations for a 1.1% rise in the Action Economics Forecast Survey. A 0.8% rise in unit labor costs was expected.

Manufacturing sector worker productivity rose at a steady 3.2% rate (2.8% y/y) after a 3.5% rise. Output grew 4.1% (4.4% y/y) after a 7.1% gain, while hours worked improved 0.8% (1.5% y/y) following a 3.4% Q2 rebound. Worker compensation per hour increased 2.5% (3.4% y/y). Adjusted for price inflation, compensation gained 1.4% (1.6% y/y), recovering a 1.4% decline during Q2. Unit labor costs fell 0.7% (+0.6% y/y) following a 1.8% decline.

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,%) Q3'14 Q2'14 Q1'14 Q2 Y/Y 2013 2012 2011
Nonfarm Business Sector
Output per Hour (Productivity) 2.0 2.9 -4.5 0.9 0.9 1.0 0.1
Compensation per Hour 2.3 2.3 6.6 3.3 1.1 2.7 2.2
Unit Labor Costs 0.3 -0.5 11.6 2.4 0.2 1.7 2.1
Manufacturing Sector
Output per Hour (Productivity) 3.2 3.5 3.2 2.8 2.3 1.9 1.0
Compensation per Hour 2.5 1.6 8.9 3.4 0.6 1.7 1.7
Unit Labor Costs -0.7 -1.8 5.5 0.6 -1.6 -0.2 0.8
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