Global| Feb 05 2009U.S. Worker Productivity Growth Up, Unit Costs Ease
by:Tom Moeller
|in:Economy in Brief
Summary
During last year's fourth quarter, labor productivity in the nonfarm business sector rose 3.2% (AR), up sharply from a 1.5% increase during 3Q. The rise pulled growth for the whole year up to 2.8% which doubled the gain during all of [...]
During last year's fourth quarter, labor productivity in the nonfarm business sector rose 3.2% (AR), up sharply from a 1.5% increase during 3Q. The rise pulled growth for the whole year up to 2.8% which doubled the gain during all of 2007. The rise far outpaced Consensus expectations for a 1.2% increase.
As workers became more productive last quarter, that raised the growth in compensation to 5.0%. Year-to-year, however, the rise failed to translate into faster growth in worker pay. Growth in compensation per hour in fact decelerated last year to 3.4% which was the slowest since 1997.
The drop in compensation growth was the result of the recession. It lowered output by 5.5% during 4Q and growth for the full year to 1.0% from 2.0% in 2007 and from 3.2% in 2006. Hours worked fell by more, thus lifting productivity. They fell at an 8.4% rate last quarter and 1.8% for the full year.
The acceleration in productivity growth dropped the quarterly increase in unit labor costs to 1.8%. For the full year, the 0.5% gain in unit labor costs was the weakest in five years.
In the factory sector, however, the story was different. Productivity declined at a 3.0% rate which was near the rate of decline during the prior two quarters. For the year as a whole factory sector productivity did rise 1.3%. However, that only about matched the 2006 increase which was down sharply from a 4.9% rise in 2005 and gains of 6% to 7% in 2002 and 2003. Unit labor cost growth in the factory sector thus surged last quarter at a 13.3% rate and it rose at a quickened 2.5% rate for the year.
| Nonfarm Business Sector (SAAR, %) | 4Q '08 | 3Q '08 | Y/Y | 2008 | 2007 | 2006 |
|---|---|---|---|---|---|---|
| Output per Hour | 3.2 | 1.5 | 2.7 | 2.8 | 1.4 | 1.0 |
| Compensation per Hour | 5.0 | 4.2 | 3.5 | 3.4 | 4.1 | 3.8 |
| Unit Labor Costs | 1.8 | 2.6 | 0.7 | 0.5 | 2.7 | 2.8 |
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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