Global| Feb 04 2021U.S. Productivity's Decline in Q4 Reverses Q3 Strength
by:Tom Moeller
|in:Economy in Brief
Summary
• Nonfarm worker productivity posts deepest drop in forty years. • Compensation increases moderately. • Unit labor costs surge. Nonfarm business sector productivity declined 4.8% (SAAR, +2.5% y/y) during Q4'20 following a 5.1% Q3 [...]
• Nonfarm worker productivity posts deepest drop in forty years.
• Compensation increases moderately.
• Unit labor costs surge.
Nonfarm business sector productivity declined 4.8% (SAAR, +2.5% y/y) during Q4'20 following a 5.1% Q3 surge, revised from 4.6%. That followed a 10.6% Q2 increase. A 2.8% decline had been expected in the Action Economics Forecast Survey. It was the largest quarterly decline since Q2 1981. The volatility left annual productivity growth at 2.6%, the biggest increase for any year since 2007. Real output improved 5.3% (-2.7% y/y) following a 44.1% Q3 surge, revised from 56.2%. Hours-worked strengthened 10.7% (-5.0% y/y) after increasing 37.1% in Q3, revised from 30.3%. The decline in productivity raised unit labor costs by 6.8% (5.2% y/y) which offset a 7.0% Q3 decline, revised from -6.6%. A 3.7% rise had been expected. Hourly compensation rose 1.7% (7.8% y/y) after falling a little-revised 2.2%.
Factory sector productivity increased 3.0% (2.1% y/y) following a record 20.2% Q3 gain, revised from 19.9%. Durable manufacturing productivity rose 5.3% (2.7% y/y) after surging 48.1% while nondurable manufacturing productivity held steady (0.8% y/y). Total manufacturing unit labor costs declined 2.4% (+6.5% y/y) following a 12.4% drop during the third quarter, revised from -12.1%. Compensation edged 0.5% higher (8.7% y/y) following four quarters of strong growth.
The productivity and labor cost figures are available in Haver's USECON database.
| Productivity & Costs (SAAR, %) | Q4'20 | Q3'20 | Q2'20 | Q4'20 Y/Y | 2020 | 2019 | 2018 |
|---|---|---|---|---|---|---|---|
| Nonfarm Business Sector | |||||||
| Output per Hour (Productivity) | -4.8 | 5.1 | 10.6 | 2.5 | 2.6 | 1.7 | 1.4 |
| Compensation per Hour | 1.7 | -2.2 | 24.3 | 7.8 | 7.0 | 3.6 | 3.4 |
| Unit Labor Costs | 6.8 | -7.0 | 12.3 | 5.2 | 4.3 | 1.9 | 1.9 |
| Manufacturing Sector | |||||||
| Output per Hour (Productivity) | 3.0 | 20.2 | -13.7 | 2.1 | -0.2 | 0.1 | 0.4 |
| Compensation per Hour | 0.5 | 5.3 | 24.5 | 8.7 | 7.2 | 2.9 | 2.1 |
| Unit Labor Costs | -2.4 | -12.4 | 44.3 | 6.5 | 7.4 | 2.8 | 1.7 |
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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