Global| Nov 04 2010U.S. Labor Productivity Improves And Lowers Unit Costs
by:Tom Moeller
|in:Economy in Brief
Summary
Along with an improvement in output last quarter, labor productivity also improved. Labor productivity in the nonfarm business sector rose 1.9% (AR) and recouped its 2Q decline. The rise exceeded Consensus expectations for a 0.9% [...]
Along with an improvement in output last quarter, labor productivity also improved. Labor productivity in the nonfarm business sector rose 1.9% (AR) and recouped its 2Q decline. The rise exceeded Consensus expectations for a 0.9% increase. Nevertheless, y/y growth decelerated to 2.5% following it upward surge following last year's recession.
Last quarter's rise in productivity reflected a 3.0% quarterly gain (4.1% y/y) in output which was double the 2Q increase. Conversely, the gain in hours worked decelerated to 1.1% (1.6% y/y) from 3.5%.
Since the improvement in productivity outpaced a 1.8% gain in compensation after two quarters of decline, unit labor costs ticked down 0.1%; a 0.7% decline had been expected. The decline from last year amounted to 1.9% following a 1.6% drop during all of 2009. These declines were behind the improvement in U.S. nonfinancial corporate profits which have risen for four consecutive quarters and, as of 2Q, were up 43.9% y/y.
Despite the improvement in overall productivity, the factory sector's increase was limited to 0.4% after a 5.4% 2Q surge. The small rise slowed the y/y increase to a still-strong 3.9% from its height of 8.1% in Q1. Real output gained 4.0% (7.0% y/y) while hours worked increased 3.6% (3.0% y/y). The productivity gain lowered unit labor costs by 0.3% and by 4.6% y/y as compensation ticked up just 0.1% following two quarters of decline.
The productivity & cost figures are available in Haver's USECON database.
| Productivity & Costs (SAAR,%) | Q3'10 | Q2'10 | Q1'10 | Q3 Y/Y | 2009 | 2008 | 2007 |
|---|---|---|---|---|---|---|---|
| Nonfarm Business Sector | |||||||
| Output per Hour (Productivity) | 1.9 | -1.8 | 3.9 | 3.5 | 3.5 | 1.0 | 1.6 |
| Compensation per Hour | 1.8 | -0.6 | -0.9 | 0.5 | 1.9 | 3.3 | 4.0 |
| Unit Labor Costs | -0.1 | 1.3 | -4.6 | -1.9 | -1.6 | 2.2 | 2.4 |
| Manufacturing Sector | |||||||
| Output per Hour | 0.4 | 5.4 | 1.7 | 3.9 | 2.0 | -0.7 | 3.4 |
| Compensation per Hour | 0.1 | -1.3 | -6.5 | -0.9 | 5.2 | 4.0 | 3.3 |
| Unit Labor Costs | -0.3 | -6.4 | -8.1 | -4.6 | 3.1 | 4.7 | -0.1 |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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