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Economy in Brief

Second Quarter U.S. Productivity Unrevised; Unit Labor Costs Decline
by Gerald D. Cohen  September 6, 2018

Output per hour in the nonfarm business sector grew at an unrevised 2.9% seasonally adjusted annual rate in Q2'18 (1.3% year-on-year), following a 0.3% gain in Q1. In Q4'17 productivity declined at a 0.3% pace. The consensus in the Action Economics Forecast Survey looked for an increase of 3.0% in Q2. Nonfarm business output rose at a slightly faster 5.0% pace (3.5% y/y) in the second quarter, but this was offset by the small upward revision to hours which increased 2.0% (2.2% y/y).

Unit labor costs fell at slightly faster 1.0% rate in the second quarter (1.9% y/y) following a 3.4% gain in Q1. The Action Economics Survey expected an unrevised 0.9% decline the second quarter. The downward revision to costs resulted from compensation increasing 1.9% (vs. 2.0%) in Q2 (3.2% y/y), after 3.8% growth in the first quarter.

In the manufacturing sector, productivity increased at an upwardly revised 1.5% pace (was 0.9%) in the second quarter (unchanged from a year ago) following a 0.8% decline in Q1. Output increased at a faster 3.0% rate (was 1.9%) in Q2 (2.1% y/y) after a 2.0% gain in Q1. Hours worked grew 1.5% in Q2 (2.2% y/y) following 2.9% growth in Q1.

Unit labor costs in the factory sector declined at a 0.2% rate in Q2 (2.5% y/y), a downward revision from the 0.6% previously reported gain. In the first quarter costs grew an unrevised 5.5%. Compensation grew 1.3% in Q2 (2.5% y/y) after a 4.6% gain in Q1.

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, %) Q2'18 Q1'18 Q4'17 Q2'18 Y/Y 2017 2016 2015
Nonfarm Business Sector
Output per Hour (Productivity) 2.9 0.3 -0.3 1.3 1.1 0.1 1.3
Compensation per Hour 1.9 3.8 1.9 3.2 3.4 1.1 3.1
Unit Labor Costs -1.0 3.4 2.3 1.9 2.2 0.9 1.8
Manufacturing Sector
Output per Hour (Productivity) 1.5 -0.8 4.4 0.0 0.7 0.3 -1.5
Compensation per Hour 1.3 4.6 1.6 2.5 3.3 0.6 2.5
Unit Labor Costs -0.2 5.5 -2.7 2.5 2.6 0.3 4.1
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