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Economy in Brief

U.S. Productivity Strength During Q3'20 Shows Little Revision
by Tom Moeller  December 8, 2020

• Growth in output per hour remains firm for second straight quarter.

• Unit labor cost decline is lessened.

Nonfarm business sector productivity increased 4.6% (SAAR) during Q3'20, revised from 4.9%, during Q3'20 following a 10.6% Q2 increase. A 4.9% gain had been expected in the Action Economics Forecast Survey. The two increases raised y/y productivity growth to 4.0%, the swiftest since Q1 2010. Real output improved an upwardly revised 56.2% (-5.8% y/y) as it bounced back from a 46.5% decline. Hours-worked strengthened 30.3% (-6.7% y/y) after falling 37.8%, which was lessened from 42.9%. Strength in productivity lowered unit labor costs by 6.6% (+2.5% y/y) which was revised from -8.9%. An 8.9% decline had been expected. Hourly compensation declined 2.3% (+8.2% y/y), revised from -4.4%, after strengthening 24.3% in Q2, revised from 20.0%.

Factory sector productivity increased a record 19.9% (1.0% y/y), revised from 19.0%, as it bounced back from a 14.0% Q2 decline, revised from -14.3%. Durable manufacturing productivity surged 47.0% last quarter (0.8% y/y) following a 26.9% decline while nondurable manufacturing productivity improved 0.7% (0.5% y/y). Total manufacturing unit labor costs declined 12.1% (+8.9% y/y), revised from -18.2% during the third quarter after rising 44.8% in Q2, revised from 28.4%. Compensation increased 5.3% (10.0% y/y) following three quarters of strong growth.

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

Productivity & Costs (SAAR, %) Q3'20 Q2'20 Q1'20 Q3 Y/Y 2019 2018 2017
Nonfarm Business Sector
Output per Hour (Productivity) 4.6 10.6 -0.3 4.0 1.7 1.4 1.2
Compensation per Hour -2.3 24.3 9.2 8.2 3.6 3.4 3.5
Unit Labor Costs -6.6 12.3 9.6 2.5 1.9 1.9 2.2
Manufacturing Sector
Output per Hour (Productivity) 19.9 -14.0 1.6 1.0 0.1 0.3 -0.4
Compensation per Hour 5.3 24.5 6.0 10.0 2.9 2.1 3.2
Unit Labor Costs -12.1 44.8 4.3 8.9 2.8 1.8 3.6
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