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Viewpoints
Commentaries are the opinions of the author and do not reflect the views of Haver Analytics.
by Tom Moeller May 7, 2020
• Output per hour fell as recessionary forces emerge.
• Unit labor costs rise and set one-year high.
Productivity in the nonfarm business sector during Q1'20 fell 2.5% (SAAR) after an unchanged 1.2% Q4'19 rise. A 5.2% decline had been expected in the Action Economics Forecast Survey. The decline lowered the y/y rise in productivity to 0.3%, its weakest gain since a slight decline in Q3'16. Output was off 6.2% (+0.1% y/y) while hours-worked fell 3.8% (-0.2% y/y).
Compensation increased 2.2% (1.7% y/y). The gain followed a similar rise during Q3. Adjusted for price changes, compensation rose 0.9% (-0.4% y/y). Unit labor costs jumped 4.8% during Q1, the largest increase in four quarters. The gain left the y/y increase steady at 1.5%. A 2.1% rise had been expected.
In the manufacturing sector, productivity declined at a 3.3% annual rate (-1.7% y/y), the largest of four consecutive quarterly shortfalls. Output weakened 7.1% (-2.4% y/y) while hours worked fell 3.9% (-0.7% y/y.
Compensation in the factory sector edged 0.2% higher (1.1% y/y). Adjusted for price inflation, compensation fell 1.0% both q/q and y/y. The compensation rise, combined with the shortfall in productivity, lifted unit labor costs in the factory sector by a 3.6% annual rate (2.9% y/y).
The productivity & cost figures are available in Haver's USECON database.
Productivity & Costs (SAAR, %) | Q1'20 | Q4'19 | Q3'19 | Q1 Y/Y | 2019 | 2018 | 2017 |
---|---|---|---|---|---|---|---|
Nonfarm Business Sector | |||||||
Output per Hour (Productivity) | -2.5 | 1.2 | -0.3 | 0.3 | 1.9 | 1.4 | 1.3 |
Compensation per Hour | 2.2 | 2.1 | -0.1 | 1.7 | 3.7 | 3.3 | 3.5 |
Unit Labor Costs | 4.8 | 0.9 | 0.2 | 1.5 | 1.7 | 1.8 | 2.1 |
Manufacturing Sector | |||||||
Output per Hour (Productivity) | -3.3 | -0.7 | -0.5 | -1.7 | 0.1 | 0.4 | -0.4 |
Compensation per Hour | 0.2 | 2.7 | -1.2 | 1.1 | 3.2 | 2.2 | 3.6 |
Unit Labor Costs | 3.6 | 3.5 | -0.7 | 2.9 | 3.1 | 1.8 | 4.0 |