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
| Released on 2/7/07 For Q4 2006 | |||||||||||||||||||||||||
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Highlights
Fourth quarter productivity rose sharply and more than expected, up 3.0 percent vs. a 0.1 decline in the third quarter. Workers put in more hours, up 1.2 percent, but they produced a 4.2 percent rise in output. Year-on-year, productivity rose 2.1 percent vs. 1.3 percent in the third quarter.
Unit labor costs rose a smaller-than-expected 1.7 percent, down from a 3.2 percent rise in the third quarter. Year-on-year, unit labor costs rose 2.8 percent, down from 3.1 percent rates in the third and second quarters.
Strong productivity and moderate labor costs are a golden combination for the economy and Federal Reserve, pointing to sustainable, non-inflationary economic growth. Though clearly good news, today's data, which are backward looking and subject to significant revision, had no initial impact on the financial markets.
Nonfarm productivity growth for the third quarter came in at an anemic 0.2 percent annualized, following 1.2 percent in the second quarter and 4.3 percent in the first quarter. Productivity needs to improve to keep inflation pressures down. Unit labor costs rose an annualized 2.3 percent, following a 2.4 percent decline in the second quarter. With last year's annual revisions downward, unit labor costs have been moderate despite a relatively tight labor market.
Nonfarm Productivity Consensus Forecast for initial Q4 06: 2.2 percent
Range: 1.0 to 2.5 percent
Unit Labor Costs Consensus Forecast for initial Q4 06: 2.0 percent rate
Range: 1.4 to 4.7 percent rate
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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. |
| 2007 Release Schedule | ||||||||||||||||||
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