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Economy in Brief

U.S. Productivity Declines for a Second Quarter
by Tom Moeller  May 4, 2016

Nonfarm output per hour during Q1'16 fell 1.0% at an annual rate (+0.6% y/y) following a 1.7% Q4'15 shortfall, revised from -2.2%. A 1.5% decline had been expected in the Action Economics Forecast Survey. It was the fourth productivity decline in the last six quarters. It occurred as a diminished 0.4% rise in output (+2.2% y/y) was outpaced by a 1.5% (1.6% y/y) rise in hours-worked. Productivity's decline was accompanied by a strengthened 3.0% rise (2.8% y/y) in compensation, the quickest rise since Q2. That combination of faster compensation growth and declining productivity raised unit labor costs 4.1% (2.3% y/y), the strongest gain since Q4'14. A 3.5% rise had been expected.

In the manufacturing sector, productivity rebounded 1.9% (1.5% y/y) following a 1.0% decline, revised from -0.7%. Output improved 0.7% both q/q and y/y, while hours-worked declined 1.1% (-0.8% y/y). Compensation growth weakened to 0.6%, but the y/y advance of 3.1% was the strongest since Q4'14. The combination of stronger productivity and weaker compensation growth caused unit labor costs to decline 1.2%, offsetting a little-revised 3.6% gain. That pushed y/y growth to 1.6%, below last year's 1.9% rise and 2.8% in 2014.

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, %) Q1'16 Q4'15 Q3'15 Q1'16 Y/Y 2015 2014 2013
Nonfarm Business Sector
Output per Hour (Productivity) -1.0 -1.7 2.0 0.6 0.7 0.8 0.0
Compensation per Hour 3.0 0.9 2.3 2.8 2.8 2.8 1.1
Unit Labor Costs 4.1 2.7 0.4 2.3 2.1 2.0 1.1
Manufacturing Sector
Output per Hour (Productivity) 1.9 -1.0 3.7 1.5 0.2 -0.1 0.7
Compensation per Hour 0.6 2.5 4.0 3.1 2.2 2.7 0.2
Unit Labor Costs -1.2 3.6 0.3 1.6 1.9 2.8 -0.5
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