U.S. Q1 Productivity Move Revised To Be Less Negative
Summary
- Output revised modestly upward and hours modestly downward.
- Compensation now has more moderate advance in Q1.
- Manufacturing productivity now seen with bigger decline.
Nonfarm business productivity declined at a 2.1% seasonally adjusted annual rate in Q1, according to revised data from the Bureau of Labor Statistics, and was down 0.8% from a year ago. The Q1 move followed a 1.6% rate of increase in Q4 2022. The original Q1 move, reported a month ago, was a 2.7% rate of decline.
In these new data for Q1, real value-added output rose 0.5%, revised upward slightly from 0.2% reported before. The revised data for Q1 represent a 1.4% increase from Q1 2022.
Hours worked in nonfarm business were revised slightly lower to a 2.6% advance from 3.0% reported before; they are now shown to be up 2.2% from a year ago, just marginally down from the 2.3% reported before.
Hourly compensation was revised downward to a 2.1% increase in Q1 (+3.0% y/y) from 3.4% initially reported, although Q1 is stronger than the 0.7% decrease in Q4. At the same time, the associated inflation measure was revised somewhat higher to 4.7% (5.3% y/y) from 4.5%; Q1 inflation was greater than the 3.3% in Q4 and 3.8% in Q3, but notably down from 9.7% in Q2 2022. The result for real compensation per hour in Q1 2023 is a decline of 1.7% (-2.6% y/y), although this is less severe than the 4.7% decline in Q4 2022.
With hourly compensation at a 2.1% increase in Q1 and real output per hour declining at a 2.1% pace, unit labor costs rose at a 4.2% rate; this is less severe than the initial report of a 6.3% advance and also lower than the Action Economics Forecast Survey with a 6.2% increase.
In the manufacturing sector, output per hour fell at a 2.5% annual rate (-1.6% y/y) in Q1, revised from a 1.3% decrease reported before. In Q4, manufacturing output per house was down at a 3.2% pace. In the revised data, manufacturing output fell 1.0% in Q1, following a 3.7% drop in Q4. Hours worked rose at a 1.6% rate in Q1 after a 0.5% decrease in Q4, yielding the larger decline in output per hour. Compensation per hour in manufacturing was revised to a 0.5% increase in Q1, a downward revision from the 2.1% rate reported before; in Q4 compensation decreased at a 0.1% rate. So, unit labor costs in manufacturing rose at a 3.1% rate in Q1, actually a bit slower than the 3.4% rate reported before, and following a 3.2% increase in Q4. Notably, unit labor costs in Q3 2022 are still seen to be up at a 10.8% rate.
The productivity and labor cost data are available in Haver’s USECON database. 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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