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Economy in Brief

U.S. Productivity Growth Is Solid
by Tom Moeller  March 7, 2019

Output per hour in the nonfarm business sector grew 1.9% (SAAR) in Q4'18, an increase fairly stable with the Q3 gain. During the last four quarters, productivity growth picked up to 1.8%, the quickest rate of increase in three years. A 1.6% Q4 rise had been expected in the Action Economics Forecast Survey. The latest increase reflected a 3.1% rise (3.7% y/y) in real output and a 1.2% increase (1.9% y/y) in hours worked.

The gain in productivity was accompanied by a 2.0% increase in unit labor costs. It followed a 1.6% rise in Q3. The 1.0% gain for the full year compared to a 2.2% increase during 2017. A 1.7% Q4 rise had been expected. Compensation growth remained solid at 3.9% (2.8% y/y) after a 3.5% rise.

In the manufacturing sector, productivity increased 2.0% (1.0% y/y), the quickest rate of growth in four quarters. It reflected a 2.7% rise (2.9% y/y) in real output accompanied by a 0.8% gain (1.9% y/y) in hours worked.

Unit labor costs in the factory sector increased 2.2% (0.8% y/y), following a 1.8% gain. The y/y rise compared to a 5.0% peak in early 2015. Compensation per hour strengthened 4.3% (1.8% y/y), the strongest increase since Q1'18.

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, %) Q4'18 Q3'18 Q2'18 Q4'18 Y/Y 2018 2017 2016
Nonfarm Business Sector
Output per Hour (Productivity) 1.9 1.8 2.8 1.8 1.3 1.1 0.2
Compensation per Hour 3.9 3.5 -0.1 2.8 2.7 3.4 1.1
Unit Labor Costs 2.0 1.6 -2.8 1.0 1.4 2.2 0.9
Manufacturing Sector
Output per Hour (Productivity) 2.0 1.0 1.2 1.0 0.8 0.7 0.3
Compensation per Hour 4.3 2.8 -5.0 1.8 1.7 3.4 0.6
Unit Labor Costs 2.2 1.8 -6.1 0.8 0.9 2.6 0.3
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