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Economy in Brief

U.S. Productivity Has Moderate Advance in Q2
by Carol Stone, CBE  August 10, 2021

• Output growth extends strong trend.

• Unit labor costs rise at just a 1% pace in Q2.

• Manufacturing productivity rebounds vigorously in Q2 after Q1 decline.

Nonfarm business sector productivity rose 2.3% SAAR in Q2 2021 (1.9% y/y), following a 4.3% SAAR advance in Q1 (4.1% y/y), which was revised from 5.4%. The Action Economics Forecast Survey had looked for a Q2 increase of 3.4%.

Real output grew at a 7.9% pace in Q2 (15.8% y/y) after 8.4% growth in Q1 (1.3% y/y); the Q1 quarterly growth rate was not revised. Hours worked rose at a 5.5% rate in Q2 (13.6% y/y) following a 4.0% gain in Q1, revised from 2.9%. Hourly compensation rose at a 3.3% pace in Q2 (2.0% y/y), after 1.4% in Q1 (6.4% y/y). The resulting change in unit labor costs was at a 1.0% annual rate in Q2 (0.1% y/y) after a 2.8% rate of decline in Q1 (2.3% y/y). The Action Economics Survey showed an expected increase of 1.2% in Q2.

Productivity in the manufacturing sector increased 6.9% (6.8% y/y) in Q2 following a decrease at a 1.3% rate in Q1 (2.2% y/y), revised from a 0.1% rise. Compensation per hour in total manufacturing rose 4.9% (0.6% y/y), following a 0.6% increase in Q1. Unit labor costs in manufacturing fell at a 1.9% pace in Q2 (-5.8% y/y) after advancing 1.9% in Q1.

Durable goods manufacturing productivity rose 4.6% (12.4% y/y) after 0.8% in Q1. Productivity in nondurable goods manufacturing rebounded at a 7.8% pace in Q2 (1.3% y/y) after a decline at a 2.7% rate in Q1.

Compensation and labor costs figures are available in Haver's USECON database. This latest report includes historical revisions related to recent revisions in Nation Income and Product Accounts and industrial production. The expectations figure is in the AS1REPNA database.

Productivity & Costs (SAAR, %) Q2'20 Q1'21 Q4'20 Q2'21 Y/Y 2020 2019 2018
Nonfarm Business Sector
Output per Hour (Productivity) 2.3 4.3 -3.4 1.9 2.4 2.0 1.5
Compensation per Hour 3.3 1.4 9.4 2.0 7.0 3.8 3.4
Unit Labor Costs 1.0 -2.8 13.3 0.1 4.5 1.8 1.9
Manufacturing Sector
Output per Hour (Productivity) 6.9 -1.3 3.1 6.8 0.3 -1.4 -0.1
Compensation per Hour 4.9 0.6 10.5 0.6 6.8 2.8 2.2
Unit Labor Costs -1.9 1.9 7.2 -5.8 6.5 4.3 2.3
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