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Economy in Brief

U.S. Productivity Improvement Is Revised Upward
by Tom Moeller  September 7, 2017

Output per hour in the nonfarm business sector grew at a 1.5% annual rate (1.3% y/y) in the second quarter, revised from 0.9% estimated last month. A 1.2% rise had been expected in the Action Economics Forecast Survey. Output rose 4.0% (2.8% y/y) while hours worked gained 2.5% (1.5% y/y). The modest productivity gains during the last two quarters left y/y growth at 1.3%. During all of last year, productivity declined 0.1% following a 1.3% rise in 2015.

Unit labor costs increased 0.2% last quarter (-0.2% y/y) following a 4.8% gain. These figures were revised from 0.6% and 5.4%, respectively. A 0.4% gain had been expected. Compensation costs increased 1.8% last quarter (1.1% y/y) after a 4.9% rise.

In the manufacturing sector, productivity rose 2.9% (1.1% y/y) last quarter, revised from 2.5%, following a 0.2% Q1 rise. Output grew 2.1% (1.6% y/y) while hours worked fell 0.7% (+0.5% y/y). Productivity growth during the last two quarters of 1.6% was improved from the 0.2% gain in 2016.

Unit labor costs in the factory sector fell a little-revised 0.4% last quarter (+0.1% y/y) following a 4.3% increase, revised from 3.9%. During the last two quarters, average growth of 2.0% compared to last year's 0.6% rise. Compensation per hour grew 2.5% (1.3% y/y) during Q2 following a 4.4% 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.

The Fed's latest Beige Book covering regional economic conditions is available here.

Productivity & Costs (SAAR, %) Q2'17 Q1'17 Q4'16 Q2'17 Y/Y 2016 2015 2014
Nonfarm Business Sector
Output per Hour (Productivity) 1.5 0.1 1.3 1.3 -0.1 1.3 1.0
Compensation per Hour 1.8 4.9 -4.5 1.1 0.9 3.2 2.9
Unit Labor Costs 0.2 4.8 -5.7 -0.2 1.0 1.9 1.8
Manufacturing Sector
Output per Hour (Productivity) 2.9 0.2 2.0 1.1 0.2 -0.6 0.1
Compensation per Hour 2.5 4.4 -4.2 1.3 0.7 2.5 2.8
Unit Labor Costs -0.4 4.3 -6.1 0.1 0.6 3.1 2.7
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