Productivity

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Productivity and Costs

Released On 11/6/2014 8:30:00 AM For Q3:14 Prior Prior Revised Consensus Consensus Range Actual Nonfarm productivity - Q/Q change - SAAR 2.3 % 2.9 % 1.5 % 0.3 % to 1.9 % 2.0 % Unit labor costs - Q/Q change - SAAR -0.1 % -0.5 % 0.8 % 0.0 % to 2.2 % 0.3 %

Highlights Nonfarm productivity growth for the third quarter advanced an annualized 2.0 percent, following a 2.9 percent boost in the second quarter. Unit labor costs nudged up 0.3 percent after falling an annualized 0.5 percent in the second quarter. Output growth slowed to 4.4 percent in the second quarter, following a 5.5 percent jump the prior quarter. Compensation growth held steady at a pace of 2.3 percent. Year-on-year, productivity was up 0.9 percent in the third quarter, down from 1.3 percent in the second quarter. Year-ago unit labor costs were up 2.4 percent, compared to up 1.5 percent in the second quarter.

Recent History Of This Indicator Nonfarm business productivity for the second quarter was nudged down to a 2.3 percent annualized gain after falling 4.5 percent in the first quarter. But unit labor costs also were bumped down to minus 0.1 percent, following an 11.6 percent annualized surge in the first quarter. First quarter numbers were heavily affected by atypically harsh winter weather. Output rebounded 5.0 percent after dipping 2.4 percent in the first quarter. Compensation growth decelerated to 2.3 percent from 6.6 percent in the first quarter. Based on deceleration in third quarter GDP growth from the second quarter weather rebound, third quarter productivity is likely to ease and labor costs firm from the second quarter.

Definition Productivity measures the growth of labor efficiency in producing the economy's goods and services. Unit labor costs reflect the labor costs of producing each unit of output. Both are followed as indicators of future inflationary trends.  Why Investors Care

Nonfarm productivity growth has remained healthy during this expansion, but it has prevented employment from growing very fast and this hurt income growth to some extent. Unit labor costs tend to fall when productivity growth accelerates and then rises as productivity growth abates. Data Source: Haver Analytics