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Economy in Brief

U.S. Productivity Decline Is Little Changed; Unit Labor Costs Strengthen
by Tom Moeller  September 1, 2016

Nonfarm output per hour during Q2'16 fell 0.6% (SAAR), revised from -0.5%. It was the third consecutive quarterly decline and matched expectations in the Action Economics Forecast Survey. The latest decline occurred as output increased 1.1% (1.1% y/y) and hours worked rose 1.7% (1.5% y/y). Compensation per hour growth was revised to 3.7% (2.2% y/y) from 1.5%. The combination of quickened compensation growth and declining productivity raised unit labor costs 4.3% (2.6% y/y), revised from 2.0%. A 2.1% increase had been expected.

In the manufacturing sector, productivity eased 0.4% (+0.9% y/y), revised from -0.2%. Output fell 0.8 (+0.3% y/y), while hours-worked declined 0.4% (-0.6% y/y). The increase in compensation growth was revised to 6.3% (3.4% y/y) from 2.9%. The gain pushed unit labor costs up 6.7% (2.5% y/y), revised from 3.1%, following a 6.0% drop.

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) -0.6 -0.6 -2.4 -0.4 0.9 0.8 0.3
Compensation per Hour 3.7 -0.9 3.1 2.2 2.9 2.8 1.2
Unit Labor Costs 4.3 -0.3 5.7 2.6 2.0 2.0 0.9
Manufacturing Sector
Output per Hour (Productivity) -0.4 1.3 -1.1 0.9 0.3 0.1 0.2
Compensation per Hour 6.3 -4.8 8.2 3.4 2.5 2.8 0.2
Unit Labor Costs 6.7 -6.0 9.5 2.5 2.2 2.7 0.0
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