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Economy in Brief

U.S. Worker Productivity Decline is Deepened
by Tom Moeller  June 4, 2015

Nonfarm productivity fell at a 3.1% annual rate during Q1 2015, revised from the initial report of a 1.9% fall. The decline followed a 2.1% retreat during the prior quarter. Harsh winter weather and the strike at West coast ports constrained real output. It fell at a 1.6% rate (+3.2% y/y), revised from 0.2%, after rising 2.6% in Q4. Hours worked gained a little-revised 1.6% (2.8% y/y) following a 4.9% rise. Compensation per hour increased at a 3.3% rate (2.1% y/y), revised from 3.1%, after a 3.4% Q4 rise, which also was revised up. When adjusted for lower prices compensation improved at a 6.5% rate (2.2% y/y), the largest increase since Q4 2012. The decline in productivity caused unit labor costs to rise at an upwardly revised 6.7% rate (1.8% y/y), the firmest increase in a year. A 2.9% decline in productivity was expected in the Action Economics Forecast Survey. Unit labor costs were expected to rise at a 5.9% rate.

Manufacturing sector worker productivity declined at a little-revised 1.0% rate last quarter (+1.5% y/y) following no change in Q4, also little changed. The 1.1% decline in output was little revised (+3.8% y/y), following a 4.4% gain. Hours worked edged 0.1% lower (+2.3% y/y) following a 4.4% Q4 increase. Worker compensation per hour rose an upwardly revised 2.4% (1.7% y/y). Adjusted for price deflation, compensation gained 5.5% (1.8% y/y), about the same as in Q4. Unit labor costs increased 3.4% (0.2% y/y), revised from 2.7%, following a 4.2% gain.

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,%) Q1'15 Q4'14 Q3'14 Q1 Y/Y 2014 2013 2012
Nonfarm Business Sector
Output per Hour (Productivity) -3.1 -2.1 3.9 0.3 0.7 0.9 1.0
Compensation per Hour 3.3 3.4 2.8 2.1 2.6 1.1 2.7
Unit Labor Costs 6.7 5.6 -1.0 1.8 1.8 0.2 1.7
Manufacturing Sector
Output per Hour (Productivity) -1.0 0.0 3.4 1.5 2.2 1.9 1.0
Compensation per Hour 2.4 4.2 2.1 1.7 2.4 0.5 1.8
Unit Labor Costs 3.4 4.2 -1.3 0.2 0.1 -1.4 0.8
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