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Economy in Brief

U.S. Productivity Has Modest Increase; Unit Labor Costs Strengthen Moderately
by Carol Stone, CBE  May 3, 2018

Output per hour in the nonfarm business sector rose 0.7% at a seasonally adjusted annual rate in Q1'18 following a 0.3% rise in Q4'17; the latter was revised from zero change reported in March. The consensus in the Action Economics Forecast Survey looked for a Q1 gain of 0.9%. Q1 output rose at a 2.8% rate (3.6% y/y) after a 3.7% increase during Q4, while hours worked were up at a 2.1%% rate (2.2% y/y). Data were again revised back to 2013 and in some cases 2010, owing to moderate revisions in underlying data on hours, compensation and output for detailed industries from original source agencies.

Unit labor costs increased at a 2.7% rate (1.1% y/y) after Q4's 2.1% advance, revised from 2.5%. A 3.0% rise had been expected in the Action Economics survey. Compensation costs increased 3.4% (2.5% y/y), following a 2.4% gain.

In the manufacturing sector, productivity grew at a modest 0.5% pace in Q1. Q4's original 6.0% advance was revised to 4.5%. Output increased at a 3.3% pace in Q1 (2.5% y/y) after 5.6% in Q4, while hours worked grew 2.8% (1.6% y/y) following 1.1% in Q4.

Unit labor costs in the factory sector rose a 2.7% rate (+1.3% y/y), following a 2.2% decline. Compensation per hour grew 3.2% (2.1% y/y) following a 2.2% 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, %) Q1'18 Q4'17 Q3'17 Q1'18 Y/Y 2017 2016 2015
Nonfarm Business Sector
Output per Hour (Productivity) 0.7 0.3 2.6 1.3 1.3 0.0 1.2
Compensation per Hour 3.4 2.4 3.6 2.5 1.7 1.1 3.1
Unit Labor Costs 2.7 2.1 1.0 1.1 0.3 1.1 1.8
Manufacturing Sector
Output per Hour (Productivity) 0.5 4.5 -4.7 0.8 0.4 -0.4 0.3
Compensation per Hour 3.2 2.2 0.7 2.1 1.6 0.7 2.5
Unit Labor Costs 2.7 -2.2 6.0 1.3 1.1 1.1 2.2
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