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Economy in Brief

U.S. Productivity's Rise in Q1 Reverses the Decline in Q4
by Kathleen Stephansen  May 6, 2021

• Nonfarm worker productivity surges.

• Compensation per hour rises in Q1'21.

• Unit labor costs decline.

Nonfarm business sector productivity rose 5.4% (SAAR, 4.1% y/y) during Q1'21, following a decline of 3.8% (SAAR, +2.6% y/y) in Q4'20, revised from -4.2%. Productivity growth had reached 11.2% in Q2 last year, leaving the increase in productivity for the full year at 2.5%, the largest annual increase since 2010. A 4.1% rise had been expected in the Action Economics Forecast Survey.

Q1'21 real output surged 8.4% (1.1% y/y) following a 5.8% (-2.6% y/y) rise in Q4, revised from 5.3%. Hours worked rose 2.9% (-2.9% y/y) after rising 10% in Q4, revised from a 10.7% rise. Not surprisingly, as output per persons rose sharply, unit labor costs declined in Q1 by -0.3% (1.6% y/y) versus the 5.6% (4.1%) rise in Q4. The Action Economics Survey showed an expected decline of 1.1%. Hourly compensation rose 5.1% (5.8% y/y), following a 1.6% rise in Q4 (6.7% y/y).

Productivity in the manufacturing sector increased 0.1% (2.2% y/y) following a 4.5% (2.7% y/y) advance in Q4, revised from a 3% rise. Durable goods manufacturing productivity rose 0.7% (3.9% y/y), following a 5.5% rise in Q4, while non-durable manufacturing productivity advanced 0.3% (0.1% y/y) following a 2.4% rise in Q4. Total manufacturing unit labor costs rose 4.6% (0.1% y/y), a reversal from the 8.2% (0.1% y/y) decline in Q4. Compensation per hour in the manufacturing sector rose 4.6% (2.4% Y/Y), following a 4.1% decline (2.7% y/y) in Q4.

Compensation and labor costs figures are available in Haver's USECON database.

Productivity & Costs (SAAR, %) Q1'21 Q4'20 Q3'20 Q1'21 Y/Y 2020 2019 2018
Nonfarm Business Sector
Output per Hour (Productivity) 5.4 -3.8 4.2 4.1 2.5 1.8 1.4
Compensation per Hour 5.1 1.6 -5.8 5.8 6.4 3.7 3.3
Unit Labor Costs -0.3 5.6 -9.6 1.6 3.8 1.9 1.9
Manufacturing Sector
Output per Hour (Productivity) 0.1 4.5 20.7 2.2 0.3 0.2 0.4
Compensation per Hour 4.6 -4.1 -12.4 2.4 4.7 3.1 2.1
Unit Labor Costs 4.6 -8.2 -27.4 0.1 4.5 2.8 1.7
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