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Economy in Brief

U.S. Productivity Improves but Unit Labor Costs Rise
by Tom Moeller  November 5, 2015

Nonfarm productivity during Q3'15 grew 1.6% at a seasonally adjusted annual rate (0.4% y/y) following a 3.5% rise in Q2, earlier reported as 3.3%. Zero change in Q3 productivity was expected in the Action Economics Forecast Survey. Real output growth of 1.2% (2.3% y/y) was accompanied by a 0.5% easing (+1.9% y/y) in hours worked. Compensation per hour grew 3.0% (2.4% y/y) which was the quickest increase since Q4'14. The gain left unit labor costs rising at a 1.4% rate (2.0% y/y) which offset most of the prior quarter's decline.

Manufacturing sector productivity surged 4.9% (1.5% y/y) following a 2.1% increase. This was the strongest gain in four years. Real output grew 2.7% (1.8% y/y) but hours worked declined 2.1% (+0.4% y/y). Compensation per hour strengthened 5.9% (1.9% y/y) following little change in Q2. It was the firmest rise since Q1'14. As a result, unit labor costs rose 0.8% (0.5% y/y) which was the strongest increase since Q4.

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

Productivity & Costs (SAAR, %) Q3'15 Q2'15 Q1'15 Q3 Y/Y 2014 2013 2012
Nonfarm Business Sector
Output per Hour (Productivity) 1.6 3.5 -1.1 0.4 0.7 0.0 0.9
Compensation per Hour 3.0 1.7 1.5 2.4 2.7 1.1 2.7
Unit Labor Costs 1.4 -1.8 2.6 2.0 2.0 1.1 1.7
Manufacturing Sector
Output per Hour (Productivity) 4.9 2.1 -0.6 1.5 1.3 0.7 0.7
Compensation per Hour 5.9 0.0 -2.2 1.9 2.7 0.2 1.8
Unit Labor Costs 0.9 -2.0 -1.6 0.5 1.4 -0.5 1.0
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