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Economy in Brief

U.S. Productivity and Unit Labor Costs Revised Up for Q1'20
by Sandy Batten  June 4, 2020

• Output per hour revised up on weaker hours worked.

• Unit labor costs revised up on higher compensation.

Productivity in the nonfarm business sector during Q1'20 was revised up to a 0.9% q/q (SAAR) decline from the initially reported 2.5% drop. Output was revised weaker to a 6.5% q/q decline from the initially reported -6.2%. But hours worked was revised down to a 5.6% q/q decline from -3.8%. The BLS made numerous adjustments to their estimate of hours worked in the economy in an attempt to reflect at least in part the adverse impact of the coronavirus lockdown. Productivity growth is output growth minus hours worked growth. The upward revision to Q1 raised year-over-year productivity growth to 0.7% y/y from the initially reported 0.3%.

Compensation growth was revised up significantly to 4.2% q/q (SAAR) from the initially reported 2.2%. This pushed up unit labor costs even more to a 5.1% q/q increase from the previously published 4.8% gain.

In the manufacturing sector, productivity was revised up even more than for the nonfarm business sector. The initially reported 3.3% q/q (SAAR) decline was revised up to a 0.3% q/q increase. This pushed up the year-over-year calculation to -0.8% from -1.7%. The Q1 decline in manufacturing output was revised up to -6.3% q/q from -7.1%. And hours worked was revised significantly weaker to a 6.6% q/q decline from the initially reported 3.9% quarterly fall.

Compensation in the factory sector was revised up meaningfully to a 7.3% q/q increase from the previously published 0.2% q/q gain. So, even with the upward revision to productivity, unit labor cost growth shot up to 6.9% q/q from the initially reported 3.6% rise.

The productivity and labor cost figures are available in Haver's USECON database.

Productivity & Costs (SAAR, %) Q1'20 (Rev) Q1'20 Q4'19 Q1 Y/Y 2019 2018 2017
Nonfarm Business Sector
Output per Hour (Productivity) -0.9 -2.5 1.2 0.7 1.9 1.4 1.3
Compensation per Hour 4.2 2.2 3.4 2.6 3.7 3.3 3.5
Unit Labor Costs 5.1 4.8 2.2 1.9 1.7 1.8 2.1
Manufacturing Sector
Output per Hour (Productivity) 0.3 -3.3 -0.8 -0.8 0.1 0.4 -0.4
Compensation per Hour 7.3 0.2 5.5 3.5 3.2 2.2 3.6
Unit Labor Costs 6.9 3.6 6.3 4.4 3.1 1.8 4.0
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