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Economy in Brief

U.S. Productivity Remains Strong in Q1
by Kathleen Stephansen  June 3, 2021

• Upward revisions in output and compensation.

• Unit labor costs are revised up sharply.

• Continued surge in compensation per hour.

The first revision of nonfarm business sector productivity kept the Q1 rise unchanged at 5.4% (SAAR, 4.1% y/y), following a decline of 3.8% (SAAR, +2.6% y/y) in Q4'20. Recall, productivity growth had reached 11.2% in Q2 last year, leaving the increase in productivity for the full year at 2.5%, the largest annual increase since 2010.

Q1'21 real output was revised up to a rise of 8.6% (1.1% y/y) from 8.4% (1.1% y/y) in the preliminary report and following an unrevised 5.8% (-2.6% y/y) rise in Q4. Hours worked rose 3% (-2.9% y/y), slightly up from the earlier reported 2.9% rise in Q1 and following the 10% jump in Q4. Unit labor costs were revised sharply up to a rise of 1.7% (4.1% y/y) in Q1 from an earlier reported decline of 0.3% (1.6% y/y). Q4 was also revised considerably, to a surge of 14.0% (6.1% y/y) versus the prior reported rise of 5.6% (4.1%) rise in Q4. Compensation per hour rose 7.2% (8.3% y/y) in Q1, up sharply from the earlier reported rise of 5.1% (5.8% y/y) and following an upwardly revised 9.7% (8.8% y/y) rise in Q4 from 1.6% (6.7% y/y).

Productivity in the manufacturing sector was revised to show a decline of 1.7% (+1.8% y/y) versus an increase of 0.1% (+2.2% y/y) reported earlier and following a 4.4% (2.7% y/y) advance in Q4, revised from 4.5%. Durable goods manufacturing productivity rose 1.1% (4.0% y/y) revised from up 0.7% (3.9% y/y) and following a 5.6% (3.1% y/y) rise in Q4, revised slightly from 5.5%, while nondurable manufacturing productivity actually fell 3.7% (-1.0% y/y) in Q1, revised from an advance of 0.3% (+0.1% y/y). Q4 was revised slightly to a rise of 2.3% (1.5% y/y) from 2.4%. Total manufacturing unit labor costs jumped 10.7% (5.1% y/y), revised up sharply from the 4.6% (0.1% y/y) rise reported earlier. They were revised up sharply in Q4 as well to a rise of 5.1% (3.5% y/y) from the originally reported 8.2% (+0.1% y/y) decline. Compensation per hour in the manufacturing sector rose 8.9% (7.0% y/y), up sharply from the earlier report of a 4.6% (+2.4% Y/Y) rise. Q4 was also revised up sharply to a 9.8% (6.3% y/y) advance from a 4.1% decline (+2.7% y/y).

Compensation and labor costs figures are available in Haver's USECON database.

Productivity & Costs (SAAR, %) Q1'21 Q4'20 Q3'20 Q1'21 Y/Y 2020 2019 2018
Nonfarm Business Sector
Output per Hour (Productivity) 5.4 -3.8 4.2 4.1 2.5 1.8 1.4
Compensation per Hour 7.2 9.7 -5.8 8.3 7.0 3.7 3.3
Unit Labor Costs 1.7 14.0 -9.6 4.1 4.3 1.9 1.9
Manufacturing Sector
Output per Hour (Productivity) -1.7 4.4 20.7 1.8 -0.1 -1.4 -0.1
Compensation per Hour 8.9 9.8 -12.4 7.0 5.6 3.1 2.1
Unit Labor Costs 10.7 5.1 -27.4 5.1 5.8 4.6 2.2
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