Q2 U.S. Productivity Increased More Than Expected
by:Sandy Batten
|in:Economy in Brief
Summary
- Output per hour rose 2.3% saar in Q2 vs. 0.4% in Q1.
- Compensation growth slowed more than expected.
- So did unit labor costs—to 0.9% saar.
U.S. nonfarm business productivity (output per hour) increased 2.3% q/q saar in Q2 after a 0.4% quarterly gain in Q1. Nonfarm business output increased 3.3% while hours worked rose 1.0%. The Action Economics Survey Forecast had looked for a 1.7% increase in productivity. Compensation growth slowed to 3.3% in Q2 from 4.2% in Q1, thereby pushing growth of unit labor costs down to 0.9% in Q2 from 3.8%. The Actions Economics survey had expected compensation to rise 3.7% and unit labor costs to increase 2.0% in Q2.
Compared to a year ago, productivity was up 2.7% y/y in Q2, a solid, above-trend increase though slightly slower than 2.9% in Q1. This was the fourth consecutive quarter that annual productivity growth exceeded 2%. Solid productivity growth is a critical ingredient in the long-term growth of the economy and standards of living. Annual compensation growth slowed to 3.2% from 3.8%. This pushed the annual growth of unit labor costs down to 0.5%, the lowest since Q2 2019, from 0.9% in Q1.
In the manufacturing sector, productivity in Q2 grew 1.8% q/q saar after having fallen 1.1% in Q1. Compensation growth picked up to 5.1% in Q2 from 3.2%. Even with pickup in manufacturing compensation, the marked rebound in productivity led to a slowdown in unit labor cost growth to 3.2% in Q2 from 4.3% in Q1.
The productivity and labor cost data are available in Haver’s USECON database. The Action Economics expectations figures are in the AS1REPNA database.
Sandy Batten
AuthorMore in Author Profile »Sandy Batten has more than 30 years of experience analyzing industrial economies and financial markets and a wide range of experience across the financial services sector, government, and academia. Before joining Haver Analytics, Sandy was a Vice President and Senior Economist at Citibank; Senior Credit Market Analyst at CDC Investment Management, Managing Director at Bear Stearns, and Executive Director at JPMorgan. In 2008, Sandy was named the most accurate US forecaster by the National Association for Business Economics. He is a member of the New York Forecasters Club, NABE, and the American Economic Association. Prior to his time in the financial services sector, Sandy was a Research Officer at the Federal Reserve Bank of St. Louis, Senior Staff Economist on the President’s Council of Economic Advisors, Deputy Assistant Secretary for Economic Policy at the US Treasury, and Economist at the International Monetary Fund. Sandy has taught economics at St. Louis University, Denison University, and Muskingun College. He has published numerous peer-reviewed articles in a wide range of academic publications. He has a B.A. in economics from the University of Richmond and a M.A. and Ph.D. in economics from The Ohio State University.
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