Global| Sep 05 2019U.S. Productivity Growth Posted Minor Revisions, Unit Labor Costs Continued Their Ascent
Summary
Minor revisions in Productivity growth coupled with continued increases in unit labor costs Productivity in the nonfarm business sector grew at a seasonally adjusted annual rate of 2.3% during Q2'19 (1.8% year-on-year) unchanged from [...]
Minor revisions in Productivity growth coupled with continued increases in unit labor costs
Productivity in the nonfarm business sector grew at a seasonally adjusted annual rate of 2.3% during Q2'19 (1.8% year-on-year) unchanged from the mid-August preliminary report. The gain in Q1'19 stood unrevised at 3.5% (1.7% year-on-year). The gain in productivity in Q2 reflected a 1.9% (2.6% year-on-year) rise in real output coupled with a 0.4% decline (+0.9% y/y) in hours worked.
Unit labor costs grew 2.6% (2.6% y/y) in Q2, reflecting a strong 4.9% (4.4% y/y) rise in compensation costs per hour. Q2 unit labor costs were revised up from a rise of 2.4% (2.5% y/y), and compensation costs from a rise of 4.8% (4.3% y/y) reported in mid-August. The Q2 advance in compensation follows a 9.4% jump in Q1, revised from 9.2% -- the fastest rate since the end of 2012 -- raising unit labor cost growth to a revised 5.7% (was initially -1.6% and revised in mid-August to 5.5%) and 1.6% y/y (was -0.8% and then 1.5%). Importantly, last month's revisions to productivity and compensation resulted in the reversal of the downward trend in unit labor costs that had prevailed prior to these revisions.
In the manufacturing sector, productivity fell 2.2% last quarter (0.0% y/y), revised from a 1.6% decline (+0.2% y/y) and following a slight upwardly revised 1.2% rise during Q1'19 (from 1.1%). The decline in Q2 productivity reflected a 3.0% drop (+0.2% y/y) in real output accompanied by a 0.8% decline (+0.1% y/y) in hours worked. The declines in real output and hours worked were revised from a 2.1% drop (+0.4% y/y) in real output and a 0.5% decline (+0.2% y/y) in hours worked reported last month. Productivity declined by 0.6% in the durable manufacturing sector and by 4.4% in the nondurable manufacturing sector.
Unit labor costs in the factory sector rose a strong 6.7% (4.5% y/y -- the fastest growth since Q3'15) during Q2 following the strong 6.9% gain in Q1. Q2 unit labor costs were revised from the 5.8% (4.3% y/y) jump reported earlier. Compensation per hour increased 4.3% (4.5% y/y) in Q2 following an 8.2% surge during Q1'19. Compensation was previously reported as having risen 4.1% (4.5% y/y) in Q2.
The productivity & cost figures are available in Haver's USECON database.
| Productivity & Costs (SAAR, %) | Q2'19 | Q1'19 | Q4'18 | Q2'19 Y/Y | 2018 | 2017 | 2016 |
|---|---|---|---|---|---|---|---|
| Nonfarm Business Sector | |||||||
| Output per Hour (Productivity) | 2.3 | 3.5 | 0.1 | 1.8 | 1.3 | 1.3 | 0.3 |
| Compensation per Hour | 4.9 | 9.4 | 0.7 | 4.4 | 3.1 | 3.5 | 1.1 |
| Unit Labor Costs | 2.6 | 5.7 | 0.6 | 2.6 | 1.8 | 2.1 | 0.8 |
| Manufacturing Sector | |||||||
| Output per Hour (Productivity) | -2.2 | 1.2 | 0.9 | 0.0 | 0.7 | 1.2 | -0.1 |
| Compensation per Hour | 4.3 | 8.2 | 3.4 | 4.5 | 2.2 | 3.5 | 0.5 |
| Unit Labor Costs | 6.7 | 6.9 | 2.5 | 4.5 | 1.4 | 2.3 | 0.6 |
Kathleen Stephansen, CBE
AuthorMore in Author Profile »Kathleen Stephansen is a Senior Economist for Haver Analytics and an Independent Trustee for the EQAT/VIP/1290 Trust Funds, encompassing the US mutual funds sponsored by the Equitable Life Insurance Company. She is a former Chief Economist of Huawei Technologies USA, Senior Economic Advisor to the Boston Consulting Group, Chief Economist of the American International Group (AIG) and AIG Asset Management’s Senior Strategist and Global Head of Sovereign Research. Prior to joining AIG in 2010, Kathleen held various positions as Chief Economist or Head of Global Research at Aladdin Capital Holdings, Credit Suisse and Donaldson, Lufkin and Jenrette Securities Corporation.
Kathleen serves on the boards of the Global Interdependence Center (GIC), as Vice-Chair of the GIC College of Central Bankers, is the Treasurer for Economists for Peace and Security (EPS) and is a former board member of the National Association of Business Economics (NABE). She is a member of Chatham House and the Economic Club of New York. She holds an undergraduate degree in economics from the Universite Catholique de Louvain and graduate degrees in economics from the University of New Hampshire (MA) and the London School of Economics (PhD abd).
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