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Economy in Brief

U.S. Q4 Productivity Unrevised
by Sandy Batten  March 3, 2022

• Nonfarm productivity posted a still-solid 6.6% annual rate advance.

• Compensation growth revised up meaningfully.

• Unit labor cost growth revised up on upward compensation revision.

The 6.6% q/q saar increase reported for nonfarm business sector productivity in Q4 in the advance report was not revised in the second estimate. The Action Economics Forecast Survey had looked for a slight upward revision to 6.7%, reflecting the previously reported modest upward revision to Q4 GDP growth. Compared with a year ago, productivity was up 1.9%, the same as in the advance report.

The quarterly growth of compensation was revised up to 7.5% q/q saar from 6.9% in the advance report. Compensation rose 5.5% from Q4 2020. The Q4 revision to compensation pushed the quarterly growth of unit labor costs (the difference between compensation growth and productivity growth) up to 0.9% q/q from 0.3% previously reported. The Action Economics Forecast Survey had expected no revision to unit labor cost growth. Unit labor costs are up 3.5% from a year ago.

Nonfarm business output growth was revised down slightly to a 9.1% annualized pace from 9.2% in the advance report. Compared with a year ago, output was up 7.0%. Growth of hours worked was unrevised for Q4 at 2.4% q/q saar. For the four quarters of 2021, hours worked increased 4.9%.

In the manufacturing sector, Q4 output growth was revised up a full percentage point to 5.8% q/q saar from 4.8% in the advance report. The rise in hours worked was also revised up but more modestly, to 5.8% from 5.6%. This combination led to a significant upward revision in manufacturing productivity growth, to -0.1% from -0.8% in the advance report. In contrast to the nonfarm business sector, growth of manufacturing compensation was revised down to 1.3% from 3.4%. This slowed the growth in unit labor costs to 1.4% from 4.2% in the advance report/

Compensation and labor costs figures are available in Haver's USECON database. The expectations figure is in the AS1REPNA database.

Productivity & Costs (SAAR, %) Q4'21 (Rev) Q4'21 (Adv) Q3'21 Q2'21 Q4'21 Y/Y 2021 2020 2019
Nonfarm Business Sector
   Output per Hour (Productivity) 6.6 6.6 -3.9 3.2 1.9 1.9 2.4 2.1
   Compensation per Hour 7.5 6.9 6.2 9.2 5.5 5.4 7.0 3.9
   Unit Labor Costs 0.9 0.3 10.6 5.8 3.5 3.5 4.5 1.8
Manufacturing Sector
   Output per Hour (Productivity) -0.1 -0.8 -2.4 9.5 1.3 3.2 0.3 -1.4
   Compensation per Hour 1.3 3.4 -0.8 11.2 2.9 4.0 6.9 2.8
   Unit Labor Costs 1.4 4.2 1.7 1.6 1.5 0.7 6.6 4.3
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