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Economy in Brief

U.S. Productivity Revised Up, Unit Labor Costs Revised Down for Q2'20
by Sandy Batten  September 3, 2020

• Output per hour growth revised up on a smaller fall in output than initially estimated.

• The rise in unit labor costs revised down on stronger productivity and slightly weaker compensation growth.

In the second quarter of 2020, nonfarm business sector productivity increased 10.1% q/q SAAR--a 2.8%-point upward revision from the preliminary estimate of 7.3%. This was due mainly to a 1.8%-point upward revision to output. Unit labor costs increased 9.0% q/q, a smaller increase than previously reported (12.2%). This downward revision was largely due to the upward revision to productivity. Hourly compensation was revised down 0.4%-point, from a 20.4% increase to a 20.0% increase.

Manufacturing sector productivity for the second quarter of 2020 was revised up to a decrease of 14.6% q/q SAAR from a previously-reported decrease of 15.5%. Durable manufacturing productivity was also revised up, to a decline of 26.9%; nondurable manufacturing productivity was revised down slightly, to a decline of 5.1%. Total manufacturing unit labor costs increased 29.1% in the second quarter of 2020, rather than increasing 31.1% as previously reported.

The 10.1% q/q increase in nonfarm business sector labor productivity in Q2 was the largest quarterly increase since the first quarter of 1971, when output per hour increased 12.3%. The declines in both output and hours worked in the second quarter of 2020 were the largest in these series, which begins in 1947 Q1. The 20.0% increase in hourly compensation in Q2 was the largest increase in the series which also begins in 1947. Moreover, labor's share--the percentage of current-dollar output that accrues to workers in the form of compensation--increased to 59.8% in the second quarter, the highest level since 2008 Q4 (60.1%).

The productivity and labor cost figures are available in Haver's USECON database.

Productivity & Costs (SAAR, %) Q2'20 (Rev) Q2'20 Q1'20 Q2 Y/Y 2019 2018 2017
Nonfarm Business Sector
Output per Hour (Productivity) 10.1 7.3 -0.3 2.8 1.7 1.4 1.2
Compensation per Hour 20.0 20.4 9.2 7.8 3.6 3.4 3.5
Unit Labor Costs 9.0 12.2 9.6 4.9 1.9 1.9 2.2
Manufacturing Sector
Output per Hour (Productivity) -14.6 -15.5 1.7 -3.7 0.1 0.3 -0.4
Compensation per Hour 10.3 10.7 6.0 4.8 2.9 2.1 3.2
Unit Labor Costs 29.1 31.1 4.2 8.9 2.8 1.8 3.6
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