U.S. Productivity Turns Down in Q1
Summary
- Output barely rises in Q1.
- Hours worked advance at a 3.0% pace.
- Manufacturing productivity declines outright.
Nonfarm business productivity declined at a 2.7% seasonally adjusted annual rate in Q1 2023, according to the preliminary data release from the Bureau of Labor Statistics; this is a downturn from a 1.6% increase in Q4 2022. Relative to a year ago, Q1 productivity has fallen 0.9%. The Q1 quarter-to-quarter result is lower than the 2.0% decline expected in the Action Economics Forecast Survey. These data include revisions.
In Q1, real value-added output edged upward at just a 0.2% annual rate after a 2.9% increase in Q4. The Q1 2023-over-Q1 2022 gain was 1.3%.
Hours worked rose at a 3.0% annual rate in Q1 over Q4, when they had risen at a 1.3 pace. The Q1 advance is 2.3% above a year ago.
Hourly compensation was up 3.4%, seasonally adjusted annual rate, in Q1, after 4.9% in Q4 and 4.8% from a year ago. Reflecting the inflation developments throughout the economy, the value-added output price deflator increased at a 4.5% pace in Q1 after 3.3% in Q4. This yielded a reduction in real hourly compensation of 0.3% in Q1 after a 0.7% increase in Q4.
The increase in hourly compensation at a 3.4% annual rate in Q1 in the face of a decline in output per hour at a 2.7% pace meant that the labor cost per unit of output rose at a 6.3% annual rate. This followed just a 3.3% rate of advance in Q4. The Action Economics Forecast Survey had calculated a 4.9% rate of increase.
In the manufacturing sector, output per hour fell at a 1.3% annual rate in Q1 (-1.2% Q1 2023/Q1 2022) after a 3.0% rate of decline in Q4. Output actually increased at a 0.5% pace in Q1 (+0.1% Q1/Q1) following a 3.4% drop in Q4. However, hours increased at a 1.8% pace in Q1 (+1.3% Q1/Q1) after easing at a 0.5% rate in Q4, producing the decline in output per hour. Compensation per hour in manufacturing was up at a 2.1% pace in Q1 (+4.5% Q1/Q1) after a 4.8% advance in Q4, so that unit labor costs in manufacturing rose a 3.4% pace in Q1 (+5.8% Q1/Q1); this is, however, down markedly from the 8.0% surge in Q4.
The productivity and labor cost data are available in Haver’s USECON database. This release includes revisions by the BLS associated with revised inputs to hours worked and consumer price data history. The Action Economics expectations figures are in the AS1REPNA database.
Carol Stone, CBE
AuthorMore in Author Profile »Carol Stone, CBE came to Haver Analytics in 2003 following more than 35 years as a financial market economist at major Wall Street financial institutions, most especially Merrill Lynch and Nomura Securities. She has broad experience in analysis and forecasting of flow-of-funds accounts, the federal budget and Federal Reserve operations. At Nomura Securites, among other duties, she developed various indicator forecasting tools and edited a daily global publication produced in London and New York for readers in Tokyo. At Haver Analytics, Carol is a member of the Research Department, aiding database managers with research and documentation efforts, as well as posting commentary on select economic reports. In addition, she conducts Ways-of-the-World, a blog on economic issues for an Episcopal-Church-affiliated website, The Geranium Farm. During her career, Carol served as an officer of the Money Marketeers and the Downtown Economists Club. She has a PhD from NYU's Stern School of Business. She lives in Brooklyn, New York, and has a weekend home on Long Island.
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