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Economy in Brief

U.S. Productivity Revised Slightly Higher in Q3; Unit Labor Costs Lower
by Gerald D. Cohen  December 6, 2018

Output per hour in the nonfarm business sector was revised up to a 2.3% gain at a seasonally adjusted annual rate in Q3'18 (1.3% year-over-year), from the previously reported 2.2% increase. In Q2 productivity growth remained at a 3.0% rate. The consensus from the Action Economics Forecast Survey looked for a Q3 gain of 2.3%. Third quarter output and hours worked were unrevised at 4.1% (3.7% y/y) and 1.8% (2.3% y/y) respectively.

Unit labor costs were revised substantially lower to 0.9% in Q3 from 1.2% and -2.8% in Q2 (was -1.0%). These changes decreased the third quarter year-on-year gain to 1.2% from 1.5%. A 1.0% quarterly pace in Q3 had been expected by the Action Economics survey. These revisions were predominantly the result of slower compensation growth for both quarters: 3.1% (2.2% y/y) in Q3 and flat in Q2.

In the manufacturing sector, productivity was revised meaningfully higher to a 1.0% annualized gain Q3 (was 0.5%) and 1.4% y/y. The Q2 reading was unchanged at 1.2%. Output increased at an upwardly revised 4.1% pace in Q3 (3.6% y/y), while hours worked grew a slightly faster 3.1% (2.1% y/y).

Unit labor costs in the factory sector declined at a 1.2% rate in Q3 (-1.2% y/y), following a 6.1% drop. Compensation per hour edged down 0.2% (+0.2% y/y) after falling 5.0%.

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, %) Q3'18 Q2'18 Q1'18 Q3'18 Y/Y 2017 2016 2015
Nonfarm Business Sector
Output per Hour (Productivity) 2.3 3.0 0.3 1.3 1.1 0.1 1.3
Compensation per Hour 3.1 0.0 3.8 2.2 3.4 1.1 3.1
Unit Labor Costs 0.9 -2.8 3.4 0.9 2.2 0.9 1.8
Manufacturing Sector
Output per Hour (Productivity) 1.0 1.2 -0.8 1.4 0.7 0.3 -1.5
Compensation per Hour -0.2 -5.0 4.6 0.2 3.3 0.6 2.5
Unit Labor Costs -1.2 -6.1 5.5 -1.2 2.6 0.3 4.1
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