U.S. Productivity Growth Lifted by Revisions; Unit Labor Costs Also Strengthened

Nonfarm productivity during Q3'15 grew 2.2% at a seasonally adjusted annual rate, revised from 1.6%. The increase followed an unrevised 3.5% rise in Q2. The revised Q3 increase matched expectations in the Action Economics Forecast Survey. Real output growth of 1.8% (2.5% y/y) was revised from 1.2%. Hours worked eased 0.3% (+1.9% y/y), revised from -0.5%. Compensation per hour grew 4.0% (3.6% y/y) which was changed from 3.0%. The Q2 increase, however, was revised up even more sharply to 5.6% from 1.7%. As a result, unit labor cost growth last quarter was raised to 1.8% (3.0% y/y) from 1.4%, but the Q2 increase of 2.0% was lifted even more sharply from a 1.8% decline. A revised 1.0% rise in Q3 costs was expected.

Manufacturing sector productivity surged a little-revised 5.1% (1.5% y/y) during Q3, following a 2.2% increase. This remained the strongest gain in four years. Real factory-sector output grew 3.2% (2.0% y/y) but hours worked declined 1.8% (+0.4% y/y). Compensation per hour strengthened 7.5% (3.7% y/y), revised from 5.9%, but the 5.5% rise in Q2 was revised from no change. The Q3 rise was the firmest rise since Q1'14. As a result, unit labor cost growth of 2.3% (2.1% y/y) was revised from 0.8%. That followed a 3.3% Q2 gain which was revised from -2.0%.

The productivity & cost figures are available in Haver's USECON database. The expectations figures are from the Action Economics Forecast Survey and are found in the AS1REPNA database.

The Fed's latest Beige Book covering regional economic conditions is available here http://www.federalreserve.gov/monetarypolicy/beigebook/beigebook201512.htm

The Mortgage Bankers Association reported that its total Mortgage Market Volume Index was little-changed last week (20.0% y/y). Purchase applications increased 7.7% (30.2% y/y) but refinancing applications declined 6.0% (+13.% y/y).

The effective interest rate on a 15-year mortgage eased to 3.47%, but remained up from the October low of 3.28%. The effective rate on a 30-year fixed rate loan held w/w at 4.27% but the rate on a Jumbo 30-year loan was steady at 4.09%. For adjustable 5-year mortgages, the effective interest rate eased to 3.27%, but remained up from last month's low of 3.07%.

The average mortgage loan size declined to $268,000 (+5.8% y/y. For purchases, it fell to $300,300 (+6.2% y/y). For refinancings it eased to $243,300 (+4.0% y/y).

Applications for fixed interest rate loans increased 21.4% y/y, while adjustable rate loan applications improved 10.9% y/y.

The survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver's SURVEYW database.