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 9/4/08 For Q2 Revised 2008 | |||||||||||||||||||||||||
| |||||||||||||||||||||||||
Highlights
Second quarter productivity was revised up sharply while and labor costs were revised down. Today's report is good news for corporate profits in the second quarter and into the third due to cost cutting on the labor side and higher output. Second quarter productivity was raised to an annualized 4.3 percent, compared to the initial estimate of 2.2 percent and the market projection of a 3.3 percent gain. Meanwhile, unit labor costs were revised to a 0.5 percent annualized decline from the initial estimate of a 1.3 percent increase. The market had expected a 0.3 percent annualized decrease.
Compensation per hour was nudged up to a 3.7 percent gain from the initial Q2 estimate of 3.6 percent.
Year-on-year, productivity was up 3.4 percent in the second quarter, following a 3.3 percent gain the prior quarter. Year-on-year, unit labor costs in the second quarter came in at up 0.6 percent, compared to unchanged the first quarter. Compensation rose 4.0 percent on a year-ago basis - up from 3.3 percent in the first quarter.
The latest revisions to productivity and unit labor costs were due to an upward revision in output and a slightly lower dip for hours worked. The numbers are good for near-term profits but unless there is a further reduction in labor input in coming quarters, the productivity and unit labor costs numbers will not be anywhere as good as the economy likely slows. For now, however, equities should like the numbers as should bonds and the dollar.
Nonfarm productivity in the second quarter productivity slowed to an annualized 2.2 percent increase, following a 2.6 percent gain in the first quarter. Unit labor costs continued to ease with a 1.3 percent annualized increase, following a 2.5 percent rise in the first quarter. We are likely to see significant improvement in the revisions to second quarter numbers for both productivity and unit labor costs as second quarter real GDP was revised up sharply from 1.9 percent to 3.3 percent. Productivity and labor costs use much of the same source data as GDP.
Nonfarm Productivity Consensus Forecast for revised Q2 08: +3.3 percent annual rate
Range: +2.7 to +4.2 percent annual rate
Unit Labor Costs Consensus Forecast for revised Q2 08: -0.3 percent annual rate
Range: -0.5 to +0.9 percent annual rate
![[Chart]](chart.gif)
|
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. |
| 2008 Release Schedule | ||||||||||||||||||
|
powered by
![[Econoday]](../../../../../../../../../images/logo.gif){kind=logo}