U.S. Productivity Rebounds in Q4'21, Holding Down Unit Labor Costs
Summary
- Nonfarm productivity advances at strong 6.6% annual rate in Q4.
- Compensation also strong, yet again.
- Gains in productivity and unit labor costs almost exactly offsetting.
Nonfarm business sector productivity advanced at a 6.6% (SAAR) pace in Q4'21 following its drop at a 5.0% rate in Q3. A 3.5% increase in Q4 had been expected in the Action Economics Forecast Survey. The actual Q4 amount was 2.0% above Q4'2020, and for all of 2021, productivity gained 1.9% after a rise of 2.4% in 2020.
Nonfarm business output surged at a 9.2% annual rate in Q4, following Q3's modest 2.0% increase. The Q4 amount was 7.0% above a year ago. For all of 2021, output expanded 7.4%, rebounding from the 4.4% drop in 2020. Hours worked increased at a 2.4% annual rate in Q4 (4.9% y/y), less than the 7.3% pace in Q3; for all of 2021, they gained 5.4% after dropping by 6.6% in 2020.
Compensation per hour rose at a 6.9% annual rate in Q4 (5.1% y/y), following Q3's 3.9% rate of increase. For all of 2021, it was up 5.2% from 2020, when it grew 7.0%.
In Q4, the advances in compensation and in output per hour combined to yield a very modest 0.3% annualized increase in unit labor costs (3.1% y/y); that followed a notably stronger 9.3% advance in Q3. The Q4 amount was close to the Action Economic forecast consensus of a 1.0% pace of advance. The overall increase in unit labor costs for 2021 was 3.3%, less than the 4.5% in 2020.
In the manufacturing sector, productivity edged downward at a 0.8% annual rate in Q4 (1.0% y/y), following Q3's 2.6% rate of decline, that was revised from a 1.0% rate of decline reported before. For all of 2021, manufacturing productivity gained 3.1% after 2020's marginal 0.1% increase. Output itself rose at a 4.8% annual rate in Q4 (4.4% y/y) after Q3's 4.1% increase. For all of 2021 it was up 6.5%, reversing 2020's 6.5% decrease. Hours worked in manufacturing increased at a 5.6% annual rate in Q4 (3.4% y/y) after 6.9% in Q3; the 2021 total was up 3.3% after a 6.6% drop in 2020.
Factory sector compensation gained 3.4% in Q4 (4.2% y/y), somewhat stronger than the 2.7% in Q3. For the year, it gained 4.5%, following 6.8% in 2020. Unit labor costs rose at a 4.2% rate in Q4 (3.2% y/y), following 5.5% in Q3. The annual amount increased 1.4%, markedly slower than the 6.6% advance in 2020.
Compensation and labor costs figures are available in Haver's USECON database. The expectations figure is 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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