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Economy in Brief

U.S. Productivity Declines for Third Straight Quarter
by Tom Moeller  August 9, 2016

Nonfarm output per hour during Q2'16 declined at a 0.5% annual rate (-0.4% y/y) following an unrevised 0.6% Q1 shortfall. It was the third consecutive quarterly decline and compared to expectations for a 0.5 rise in the Action Economics Forecast Survey. Revisions raised growth last year to 0.9% from 0.7%. Growth in 2014 was left at 0.8%, but the 2013 increase was raised to 0.3% from no change. The latest decline occurred as output increased 1.2% (1.1% y/y) and hours worked rose 1.8% (1.5% y/y). Compensation per hour increased 1.5% (1.7% y/y) after a 0.8% decline, revised from a 3.9% increase. The combination of faster compensation growth and declining productivity raised unit labor costs 2.0% (2.1 y/y) following a 0.2% dip, previously reported as a 4.5% increase. A 1.8% increase had been expected.

In the manufacturing sector, productivity eased 0.2% (+0.9% y/y) after a 1.5% increase, revised from 1.3%. Output fell 0.8 (+0.3% y/y), while hours-worked declined 0.7% (-0.6% y/y). Compensation growth rebounded 2.9% (2.6% y/y) after a 4.6% decline, revised from a 2.5% rise. The rise pushed unit labor costs up 3.1% (1.7% y/y) following a 5.9% drop, revised from a 1.1% rise.

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, %) Q2'16 Q1'16 Q4'15 Q2'16 Y/Y 2015 2014 2013
Nonfarm Business Sector
Output per Hour (Productivity) -0.5 -0.6 -2.4 -0.4 0.9 0.8 0.3
Compensation per Hour 1.5 -0.8 3.1 1.7 2.9 2.8 1.2
Unit Labor Costs 2.0 -0.2 5.7 2.1 2.0 2.0 0.9
Manufacturing Sector
Output per Hour (Productivity) -0.2 1.5 -1.1 0.9 0.3 0.1 0.2
Compensation per Hour 2.9 -4.6 8.2 2.6 2.5 2.8 0.2
Unit Labor Costs 3.1 -5.9 9.5 1.7 2.2 2.7 0.0
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