Global| Feb 06 2020U.S. Productivity Grows As Unit Labor Cost Increase Slows in Q4
by:Tom Moeller
|in:Economy in Brief
Summary
Productivity in the nonfarm business sector during Q4'19 increased 1.4% (SAAR) following an unrevised 0.2% Q3 slip. The gain matched expectations in the Action Economics Forecast Survey. It raised productivity by 1.8% during the last [...]
Productivity in the nonfarm business sector during Q4'19 increased 1.4% (SAAR) following an unrevised 0.2% Q3 slip. The gain matched expectations in the Action Economics Forecast Survey. It raised productivity by 1.8% during the last four quarters.
Accompanying the improvement was a 2.8% (4.2% y/y) rise in compensation. It was the largest increase in three quarters and raised y/y growth to 4.2%, its quickest since Q4 2012. Adjusted for price changes, compensation rose 0.3% and a quickened 2.1% y/y. Unit labor costs increased 1.4% during Q4'19 after a 2.5% rise. A 1.1% increase was expected. The gain pulled the y/y rise to 2.4% which was the strongest gain since early-2018, up from 1.0% in Q4'18.
In the manufacturing sector, productivity declined at a 1.2% rate, off for the third straight quarter. The decline lowered factory sector productivity by 0.7% during the last four quarters, the weakest performance since Q3'17.
Compensation in the factory sector strengthened 4.6% both q/q and y/y. It was the quickest four quarter rise since Q2'09, and up from little change in 2016. Adjusted for price inflation, compensation rose 2.0% q/q and a strong 2.5% y/y. The compensation increase combined with the decline in productivity raised unit labor costs in the factory sector by 5.9%. The 5.3% y/y increase was the strongest four quarter rise in just over 10 years.
The productivity & cost figures are available in Haver's USECON database.
| Productivity & Costs (SAAR, %) | Q4'19 | Q3'19 | Q2'19 | Q4'19 Y/Y | 2019 | 2018 | 2017 |
|---|---|---|---|---|---|---|---|
| Nonfarm Business Sector | |||||||
| Output per Hour (Productivity) | 1.4 | -0.2 | 2.5 | 1.8 | 1.7 | 1.3 | 1.3 |
| Compensation per Hour | 2.8 | 2.3 | 2.5 | 4.2 | 3.8 | 3.1 | 3.5 |
| Unit Labor Costs | 1.4 | 2.5 | 0.1 | 2.4 | 2.0 | 1.8 | 2.1 |
| Manufacturing Sector | |||||||
| Output per Hour (Productivity) | -1.2 | -0.3 | -2.4 | -0.7 | 0.0 | 0.3 | -0.5 |
| Compensation per Hour | 4.6 | 3.1 | 2.6 | 4.6 | 3.8 | 2.2 | 3.5 |
| Unit Labor Costs | 5.9 | 3.3 | 5.1 | 5.3 | 3.8 | 1.8 | 4.0 |
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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