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Economy in Brief

U.S. Productivity Revised Lower in Q1; Unit Labor Costs Revised Higher
by Gerald D. Cohen  June 07, 2018

Output per hour in the nonfarm business sector was revised down to a 0.4% gain at a seasonally adjusted annual rate in Q1'18 (1.3% year-on-year), from the previously reported 0.7% increase. In Q4'17 productivity grew at an unrevised 0.3% rate. The consensus in the Action Economics Forecast Survey looked for a Q1 gain of 0.7%. First quarter output was revised slightly lower to a 2.7% rate (3.6% y/y), while hours worked were revised up to a 2.3% pace (2.3% y/y).

Unit labor costs were revised higher in both Q1’18 and Q4’17 to 2.9% (1.3% y/y) and 2.5% respectively. A 2.8% rise in Q1 had been expected in the Action Economics survey. Compensation costs were revised slightly lower to 3.3% (2.6% y/y), following an upwardly revised 2.9% gain.

In the manufacturing sector, productivity was revised substantially lower to a 1.2% annualized decline in Q1 (+0.3% y/y). The fourth quarter’s advance was revised down to 4.3%. Output increased at a downwardly revised 1.7% pace in Q1 (2.0% y/y) after 5.4% in Q4. Hours worked grew a slightly faster 2.9% (1.7% y/y) following 1.1% in Q4.

Unit labor costs in the factory sector rose at a 5.2% rate in Q1 (2.5% y/y), following a 0.2% increase. Compensation per hour grew 3.9% (2.9% y/y) following a 4.5% gain.

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, %) Q1'18 Q4'17 Q3'17 Q1'18 Y/Y 2017 2016 2015
Nonfarm Business Sector
Output per Hour (Productivity) 0.4 0.3 2.6 1.3 1.3 0.0 1.2
Compensation per Hour 3.3 2.9 3.6 2.6 1.7 1.1 3.1
Unit Labor Costs 2.7 2.5 1.0 1.3 0.4 1.1 1.8
Manufacturing Sector
Output per Hour (Productivity) -1.2 4.3 -5.0 0.3 0.7 0.3 -1.5
Compensation per Hour 3.9 4.5 0.7 2.9 1.7 0.7 2.5
Unit Labor Costs 5.2 0.2 6.0 2.5 1.0 0.4 4.1
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