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Economy in Brief

U.S. Productivity Decline Is Lessened
by Tom Moeller  March 3, 2016

Nonfarm output per hour declined 2.2% at an annual rate (+0.5% y/y) during Q4'15, revised from a -3.0% estimated last month. The shortfall followed a 2.0% Q3 increase. A 3.1% decline had been expected in the Action Economics Forecast Survey. It was the third decline in the last five quarters and left growth during all of last year at 0.7%, roughly the same as in 2014. The decline occurred as output increased a strengthened 1.0% (2.1% y/y) while hours worked gained 3.2% (1.6% y/y). Compensation grew 1.1% and 2.8% for the full year. The strengthened rise in productivity and a little-changed estimate of compensation growth combined to lower the rise in unit labor costs to 3.3% (2.1% y/y) from 4.5% estimated last month. It still was the quickest growth in a year. During all of 2015, unit labor cost growth of 2.1% was the strongest since 2011.

In the manufacturing sector, productivity eased 0.7% last quarter (+1.4% y/y), revised from -0.4%. For the full year, productivity growth was steady at 1.3%. Output edged 0.1% higher in Q4 (1.0% y/y) and hours worked grew 0.8% (-0.4% y/y). Compensation growth weakened, however, to a lessened 2.4% (2.4% y/y) versus much stronger growth in the earlier two quarters. The combination of weaker productivity and moderate compensation growth raised unit labor costs by 3.2%. For the full year, growth in unit labor costs eased to 0.8%.

The productivity & cost figures are available in Haver's USECON database. The expectations figures are from the Action Economics Forecast Survey and are found in the AS1REPNA database.

Productivity & Costs (SAAR, %) Q4'15 Q3'15 Q2'15 Q4 Y/Y 2015 2014 2013
Nonfarm Business Sector
Output per Hour (Productivity) -2.2 2.0 3.1 0.5 0.7 0.8 0.0
Compensation per Hour 1.1 2.3 5.2 2.6 2.8 2.8 1.1
Unit Labor Costs 3.3 0.4 2.0 2.1 2.1 2.0 1.1
Manufacturing Sector
Output per Hour (Productivity) -0.7 5.0 2.3 1.4 1.3 1.3 0.7
Compensation per Hour 2.4 4.0 5.6 2.4 2.2 2.7 0.2
Unit Labor Costs 3.2 -0.9 3.2 1.0 0.8 1.4 -0.5
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