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Economy in Brief

U.S. Productivity and Unit Labor Cost Growth Revised Modestly
by Sandy Batten  September 2, 2021

• Q2 productivity rose 2.1% q/q saar, down from the initial estimate of 2.3%.

• Output growth a little stronger than initially reported, but hours worked also higher.

• Downward revision to productivity and upward revision to compensation yielded small upward revision to unit labor costs.

Nonfarm business sector productivity growth was revised down to 2.1% q/q saar (1.8% y/y) in Q2 2021 from the initially reported 2.3%, following a 4.3% advance in Q1. The Action Economics Forecast Survey had looked for a small upward revision to 2.4% for Q2.

Real nonfarm business output grew at an 8.1% (15.8% y/y) pace in the second estimate for Q2, up from the initially reported 7.9% but down from the 8.4% advance in Q1. The growth of hours worked was revised up to 6.0% (13.7% y/y) from 5.5% in the first estimate. The slightly larger upward revision to hours than to output led to the downward revision in productivity growth. Hourly compensation growth was revised up slightly to 3.4% in the second estimate from 3.3% initially. This combined with the downward revision in productivity to generate an upward revision in unit labor force growth to 1.3% in Q2 from 1.0% initially. The Action Economics Survey showed an expected unit labor costs to have remained at 1.0% in Q2.

By contrast, productivity in the manufacturing sector for Q2 was revised up markedly to 8.0% q/q saar from the initially reported 6.9%. Output was revised significantly stronger, 5.5% vs. 3.8 initially, and the decline in hours worked was revised smaller, -2.3% vs. -2.9% initially. Compensation growth was revised lower, 4.7% vs. 4.9%, resulting in a larger quarterly decline in unit labor costs than initially estimated, -3.0% vs. -1.9%.

Compensation and labor costs figures are available in Haver's USECON database. This latest report includes historical revisions related to recent revisions in Nation Income and Product Accounts and industrial production. The expectations figure is in the AS1REPNA database.

Productivity & Costs (SAAR, %) Q2'20 Q1'21 Q4'20 Q2'21 Y/Y 2020 2019 2018
Nonfarm Business Sector
Output per Hour (Productivity) 2.1 4.3 -3.4 1.8 2.4 2.0 1.5
Compensation per Hour 3.4 1.4 9.4 2.0 7.0 3.8 3.4
Unit Labor Costs 1.3 -2.8 13.3 0.2 4.5 1.8 1.9
Manufacturing Sector
Output per Hour (Productivity) 8.0 -0.9 3.1 7.2 0.3 -1.4 -0.1
Compensation per Hour 4.7 0.6 10.5 0.6 6.8 2.8 2.2
Unit Labor Costs -3.0 1.5 7.2 -6.1 6.5 4.3 2.3
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