Global| Aug 07 2007U.S. Productivity Missed 2Q Estimate, Cost Increase Fastest Since 2000
by:Tom Moeller
|in:Economy in Brief
Summary
Growth in non-farm labor productivity of 1.8% last quarter fell a bit short of Consensus forecasts for a 2.1% increase but it was the fastest since a 2.5% rise during 1Q06. The gain was up from the revised 0.7% increase during the [...]
Growth in non-farm labor productivity of 1.8% last quarter fell a bit short of Consensus forecasts for a 2.1% increase but it was the fastest since a 2.5% rise during 1Q06. The gain was up from the revised 0.7% increase during the first quarter but the average of the two at 1.2% barely exceeds the 1.0% gain last year and falls well short of 2.7% growth during 2004.
What Happened to the Gains From Strong Productivity Growth? from the Federal Reserve Bank of Kansas City can be found here.
Output growth of 4.2% (2.0% y/y) also was the best since 1Q06 and was an acceleration from the 1.5% average of the prior four quarters.
Compensation growth held at an elevated 3.9% (5.2% y/y), the fastest y/y growth since 2000. 
As a result, unit labor costs rose 2.1% during 2Q07 which was down from a 3.0% rise the prior quarter, but the 4.5 gain from the prior year also was the fastest since 2000.
The implicit price deflator rose 2.4% (2.0% y/y) and the increase lifted the ratio of prices to unit labor costs just slightly. It still well below the high during last year. During the last ten years there has been a 59% correlation between the ratio and the y/y growth in corporate profits.
Factory sector productivity grew 1.6% (2.9% y/y, about the same as during the prior quarter. Manufacturing compensation grew 2.8% (6.2% y/y) which was the fastest y/y gain since 2005. And though the 1.2% quarterly gain in unit labor costs was down from 5.0% during 1Q, the y/y gain of 3.2% in factory sector unit labor costs was the fastest since 2000.
| Non-farm Business Sector (SAAR) | 2Q '07 | 1Q '07 | Y/Y | 2006 | 2005 | 2004 |
|---|---|---|---|---|---|---|
| Output per Hour | 1.8% | 0.7% | 0.6% | 1.0% | 1.9% | 2.7% |
| Compensation | 3.9% | 3.7% | 5.2% | 3.9% | 4.0% | 3.6% |
| Unit Labor Costs | 2.1% | 3.0% | 4.5% | 2.9% | 2.0% | 0.9% |
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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