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Economy in Brief

U.S. Productivity Eases; Unit Labor Costs Increase
by Tom Moeller  February 1, 2018

Output per hour in the nonfarm business sector slipped at a 0.1% annual rate during Q4'17 following a 2.7% Q3 rise, revised from 3.0%. It was the first decline in productivity since Q1'16. A 1.2% rise had been expected in the Action Economics Forecast Survey. Output rose at a 3.2% rate (3.2% y/y) after a 4.0% increase during Q3, while hours-worked strengthened 3.3%% (2.1% y/y). During all of 2017, productivity increased 1.2%, up from the 0.7% average during the last five years.

Unit labor costs increased at a 2.0% rate (1.3% y/y) after a 0.1% slip, revised from -0.2%. A 0.9% rise had been expected. During the last five years, unit labor costs rose 1.2% on average. Compensation costs increased 1.8% (2.4% y/y) following an unrevised 2.7% gain. During the last five years, compensation costs have risen at a 1.9% rate on average.

In the manufacturing sector, productivity surged at a 5.7% annual rate last quarter following a 4.9% decline, revised from -4.4%. Output surged 7.3% last quarter (1.7% y/y) while hours-worked lengthened 1.5% (1.6% y/y). During all of last year, factory sector productivity rose 0.7% compared to a 0.4% five-year average.

Unit labor costs in the factory sector declined at a 3.7% rate (+1.1% y/y) following a 5.4% rise. During all of last year unit labor costs rose 0.9% compared to a 1.1% increase during the last five years. Compensation per hour grew 1.8% (2.2% y/y) following a 0.2% rise. During the last five years, compensation costs rose 1.6% on average.

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, %) Q4'17 Q3'17 Q2'17 Q4'17 Y/Y 2017 2016 2015
Nonfarm Business Sector
Output per Hour (Productivity) -0.1 2.7 1.5 1.1 1.2 -0.1 1.3
Compensation per Hour 1.8 2.7 0.3 2.4 1.5 1.0 3.1
Unit Labor Costs 2.0 -0.1 -1.2 1.3 0.2 1.1 1.8
Manufacturing Sector
Output per Hour (Productivity) 5.7 -4.9 3.6 1.1 0.7 0.4 0.2
Compensation per Hour 1.8 0.2 2.3 2.2 1.6 0.7 2.5
Unit Labor Costs -3.7 5.4 -1.2 1.1 0.9 0.3 2.2
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