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Economy in Brief

U.S. Productivity Growth Improves and Drives Unit Labor Cost Growth Lower
by Tom Moeller  May 2, 2019

Output per hour in the nonfarm business sector grew 3.6% (SAAR) during Q1'19 following a 1.3% gain in Q4'18, revised from 1.9%. It was the strongest increase since Q3'14. During the last four quarters, productivity growth picked up to 2.4%, the quickest rate of increase since Q3'10. A 1.0% Q1 rise had been expected in the Action Economics Forecast Survey. The latest increase reflected a 4.1% rise (3.9% y/y) in real output and a 0.5% gain (1.5% y/y) in hours worked.

The strength in productivity drove unit labor costs 0.9% lower (+0.1% y/y) following a 2.5% increase during Q4'18, revised from 2.0%. It was the first decline in three quarters and the weakest four-quarter performance since a y/y decline in Q4'13. A 2.1% rise had been expected for last quarter. Compensation growth decelerated to 2.6% after a 3.9% rise. Slower growth lessened the four-quarter gain to 2.5%, down from a peak of 4.0% y/y in Q3'17.

In the manufacturing sector, productivity increased 1.7% last quarter (1.2% y/y) following a 1.1% rise during Q4'18, revised from 2.0%. It reflected a 1.0% decline (+1.8% y/y) in real output accompanied by a 2.6% fall (+0.7% y/y) in hours worked.

Unit labor costs in the factory sector increased 0.8% following a 3.2% Q4 rise, revised from 2.2%. The y/y decline of 0.1% compared to a 4.9% peak in Q3'15. Compensation per hour increased 2.4% following a 4.3% surge during Q4'18. Four-quarter growth in compensation of 1.1% was below the 3.8% high during Q3'17.

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, %) Q1'19 Q4'18 Q3'18 Q1'19 Y/Y 2018 2017 2016
Nonfarm Business Sector
Output per Hour (Productivity) 3.6 1.3 1.9 2.4 1.3 1.2 0.2
Compensation per Hour 2.6 3.9 3.5 2.5 2.8 3.4 1.1
Unit Labor Costs -0.9 2.5 1.6 0.1 1.4 2.2 0.9
Manufacturing Sector
Output per Hour (Productivity) 1.7 1.1 0.6 1.2 0.8 1.2 -0.1
Compensation per Hour 2.4 4.3 2.8 1.1 1.7 3.3 0.6
Unit Labor Costs 0.8 3.2 2.1 -0.1 0.9 2.1 0.7
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